Friday, December 25, 2009

Unlimited Fed Gov Backing For Fannie Mae & Freddie Mac


By Norris McDonald

America has officially adopted the Chinese model by providing unlimited federal government monetary backing for the secondary mortgage market giants Fannie Mae and Freddie Mac. Although such backing was always implied, they is now actually functioning as a qovernmental entity that maintains jobs while promoting housing capitalism. Combined with all of the other bailouts of formerly private institutions, we have adopted the Chinese model whereby one cannot tell where the government part begins and the private ownership begins. It is capitalism backed by socialism. It is the same engine that China perfected and that is making the Chinese economy the hottest one in the world right now.

So my observation is not a criticism. It is an acknowledgment about how America has changed in the last year. There was no way the housing bubble could have continued to expand on its own without eventually bursting. There is no way America can provide health insurance for all without government participation. Same with union-partnered automobile companies that want to pay a wage that can afford a mortgage, health care and retirement. The Bush administration and the Obama administration had no choice but to bail out the various markets that were collapsing under their own weight.

The electric utilities are next. They cannot continue to meet the electricity demand requirements while being forced to keep rates low. Smart meters are not going to keep people from going to Best Buy and Costco to buy the latest electricity gobbling gadgets. And we are moving towards plugging the cars into a home electrical socket too.

We are China. And it is not necessarily a bad thing. We just have to learn to do it as well as them. A good start might be to completely limit the exorbitant executive compensation payments except in cases where company performance merits it. (Wash Post, 12/25/09)

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