Last week we saw the unprecedented move by the US Federal government when they seized the assets of floundering mortgage goliaths Freddie Mac and Fannie Mae. In doing so they instituted a 15 month nationalization program which was popularly viewed as a temporary necessity in order to curb the further unraveling of the national credit problem. It was intended to preserve the capital of both public and private funds to include public pensions, which were a significant holding of both Freddie Mac and Fannie Mae.
Treasury Secretary Henry Paulson recently stated:
A failure of [Fannie Mae and Freddie Mac] would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance.
Paulson goes on to state:
The new administration must decide what role government in general, and those entities in particular, should play in the housing market.
This 15 month nationalization program is merely a bandage on an open wound needing surgery.
In an interview with CNBC Jim Rogers, CEO of Rogers Holdings, stated:
America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions…This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this.
I tend to agree with Mr. Rogers. Why should you and I be on the proverbial hook for 5 TRILLION DOLLARS in bad housing loans! In essence every hardworking American taxpayer is now paying for the risky and irresponsible financial recklessness of these loan institutions who were more than greedy to reap enormous profits. Freddie Mac and Fannie Mae, NOT the American taxpayers, should be made to bare the burden their losses have created.
Even our neighbors across the pond at Independent Strategies, a London Based Economics Firm, stated:
The US government takeover…makes the US the most socialist system in the world outside of places like North Korea and Cuba. It will have 75% of its current housing finance and the majority of its remaining capital allocation being financed with credit that is directly the result of government and federal intervention.
Unfortunately many Americans won't understand the lasting implications and ramifications of this action. Remember the abolition of the Gold Standard of 1971 by president Nixon?
I won't even mention the 85 billion dollar federal government AIG bailout we had this week…So what's your take people?
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