It was the night before Christmas, when normally nothing newsworthy stirs. Like a thief in the night, that was the moment selected with precision by U.S. Treasury Secretary Timothy Geithner to stealthily announce a radical policy shift regarding the two bankrupt Government Sponsored Entities (GSEs), Fannie Mae and Freddie Mac. When both of these mortgage giants teetered on the edge of insolvency in September 2008, they were placed under the largesse of the federal government and the overburdened American taxpayer. In the early days of the Obama administration, $400 billion was established as the maximum guarantee the Treasury Department would provide to these two GSEs to ensure their survival. It was highly unlikely that anything close to $400 billion would be the ultimate cost to the American taxpayer, so assured the Treasury Department. But amid the reassuring rhetoric, something very peculiar is obviously being hatched by Geithner and Company.
On Christmas Eve, one of the quietest news days of the year, the U.S Treasury announced that in lieu of the previous $400 billion backstop, the U.S. taxpayers will now provide unlimited financial support to ensure the survival and liquidity of Fannie Mae and Freddie Mac for the next 3 years. Apparently, by slipping in this policy change near year end, no new legislation is required from Congress. Which is just as well, since it is unlikely that such an unfathomable level of bailout support would be approved by Congress during a mid-term election year.
The real question is this: if, as Treasury originally claimed, a $400 billion guarantee was more than sufficient for these two GSEs, why sneak in a new taxpayer commitment, with no limits? Speculation is rife, and being fed by the total lack of transparency on the part of Timothy Geithner and his minions. However, this much is clear: Fannie Mae and Freddie Mac collectively underwrite or guarantee half of all the residential mortgages in the United States. If the U.S. Treasury is privy to data on emerging trends on mortgage defaults and residential real estate deflation, there must be something Geithner and his team are cognizant of that they are too frightened to share with the American public, and are spooked to a level that requires such a surreal form of taxpayer guarantee.
With more than $5 trillion of mortgages sitting on the balance sheets of these two GSEs, a new wave of bad real estate news could conceivably witness the American public assume responsibility for another trillion dollars in bad debts, without a single vote by Congress. There is much more to this story than meets the eye, and the policymakers at U.S. Treasury desperately want to keep the full picture as to why they enacted such a massive overdose of moral hazard in the dark of night under wraps. But a Christmas Eve news dump only obfuscates reality, as opposed to making it disappear. Red lights and shrill klaxons must be going off at Treasury. As with much else involving the global economic and financial crisis, however, the public will be the last to be enlightened when the rationale underlying the decision to guarantee all the financial obligations of Fannie Mae and Freddie Mac to infinity can no longer be suppressed.
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Trickle down? Sounds like 1939 in Germany. The Empire is willing to start another world war if necessary to hold onto their power.
Neither political party is trusted by the Amnerican people. Patriots should stand together to resist this attack from the top - unitary executive, etc.
Starting wars around the globe is meant to save the Empire. "If we don't hang together, we most assuredly will all hang separately." - Benjamin Franklin.
We need to quit allowing ourselves to be divided. Fox News keeps the drum beating to separate us with wedge issues. Bush/Harriman - what's the difference? Obama is the flip side of Bush - two business parties while nobody represents the People. Divide and conquer. Read European history and the history of the British Empire by an Oligarchy. It wasn't for the people of the British Isles but the financiers who are now desparate from their gambles.
Notice how many posts are on this article? Only two if they let mine through and it was posted three days ago. There should be a couple of thousand posts on this.