- The Washington Times - Friday, September 12, 2008


Treasury Secretary Henry Paulson’s bailout for Fannie Mae and Freddie Mac does essentially the following: uses taxpayer money to ensure large foreign and domestic banks won’t lose money on their investments in the two mortgage giants. This is typical for the former chairman of global investment banking, securities and investment management firm Goldman Sachs.

What is Congress saying about this? Nothing at all. All of their 535 hands are tied because they gave Mr. Paulson and the treasury the authority to make this deal. What they are doing is complaining that Fannie CEO Richard Syron shouldn’t get their contractually obligated severance packages which combined total $24 million.

What about the $200 billion the taxpayers are having fleeced out of their pockets to make sure some super-wealthy financiers’ risky debentures don’t falter? You won’t hear any cries from members of Congress or the presidential candidates saying in an election year: “We’re sorry that we allowed these two companies to put our economy at risk for so long right in front of our eyes and that now we have to use a few tons of your money to bail them out.” And they certainly won’t tell you that the people they gave the power to offer a bailout and manage the two companies have set it up in such a way that it could happen again.

What’s worse are the accounting games the White House has engaged in to mask the true costs. This takeover will lead to a $638 billion deficit — when you add the $200 billion Fannie-Freddie bailout to the projected $438 billion deficit for fiscal 2008. But of course they have passed that off into next year’s budget, which starts Oct. 1. Some analysts have suggested nationalizing the two companies but that would add $6 trillion to the existing $9.6 trillion national debt. Still, the bailout sets a precedent for nationalization in the future if the two companies aren’t liquidated and sold off now. So, what ultimately is the plan?

U.S. Treasury and increase the debt. And their response to the bailout consists of complaining about the severance packages.

Mr. Paulson is going to face some tough questions about the bailout next week, when Congress will hold pointless hearings just to save face. It isn’t likely that the presidential candidates will face any serious questions until the debates. But can anyone really describe how he will heal the debt, budget deficits and mortgage crisis in 90 seconds?

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