"In other news today, the merger of the U.S. Government with TMZ Corporation…" These words, paraphrased from a comedy routine by the Firesign Theater, a satirical comedy troupe which became popular back in the 1970s, seemed absurd and laughable at the time. Who would have thought that nearly 40 years later, it would become a reality when, this week, the U.S. government merged with Fanny Mae, Freddie Mac, and AIG Corporation?
U.S. taxpayers are now the proud owners of Fanny and Freddie, and AIG, but don't expect any dividends or returns on your investment. What we have purchased is nothing more than a used car for which we will pay $785 billion. What's more, don't expect the corrupt politicians and corporate executives responsible for this boondoggle to be held accountable. It’s not just the people, but the debt-addicted system that has prevailed for the past couple of decades that has led to this.
In my view, the CEOs and corporate executives of these organizations, instead of walking away with millions of dollars in bonuses, should have all of their money and assets seized, sold, and returned to the taxpayers while answering for their crimes in federal court. President Bush and the Democrats in Congress see it differently. When was the last time you saw Democrats prosecute Democrats? Isn’t Rep. William Jefferson (D-LA) still serving in Congress after being caught with $90,000 worth of bribes in his freezer?
Federal Reserve chairman Ben Bernanke, Treasury Secretary Hank Paulson, and President Bush decided to take out the U.S. treasury credit card to buy Fanny and Freddie‘s bad debts for $700 billion. They didn't stop there. they then went on to charge $85 billion to the taxpayers to buy up all the bad debts of American International Group (AIG), the worlds second largest insurance provider, 2/3 of which is owned by foreign investors. It gets worse.
It is a clear violation of the Constitution. Article 1, Section 9 states: “No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time.”
In all fairness, the president, the treasury secretary, and the Federal Reserve chairman will meet with Congress this week to hammer out legislation to make this giveaway of our money look constitutional - by creating a congressional bill to authorize the appropriation from the federal treasury. The trouble is; money can be drawn from the public treasury only for the purpose of financing government functions, according to Section 8. There is no provision for writing legislation to justify the taking of money from taxpayers to give to someone else.
They tell us that these buyouts are necessary to save the economy from a deep recession resulting from a “falling house of cards,” which would not have happened without the changes in federal regulations over the past 16 years, and corrupt politicians failing to respect the Constitutional limits on their powers.
We have now reached the point to where we must intentionally and knowingly disregard the Constitution to save the economy. Or to put it another way; government regulations, created by the Clinton administration and the Black Caucus in 1992, and later reinforced by the Bush administration, caused this economic crisis and there is no constitutional way out of it other than to let the economy fail.
When federal regulations were forced on housing lenders by congressional Democrats and the Clinton administration to require them to accept sub-prime, high risk, mortgages from unqualified buyers, that started the ball rolling toward the economic crisis we have today.
It wasn’t only the politicians, but also the corporate executives who cooked the books when they saw the problem coming - to assure themselves of big payoffs - instead of doing the right thing and bringing the problem to the attention of the FTC and Congress. It was the same as what happened with Enron, only this time they were all Democrats. While Enron executives are now in jail, Fanny and Freddie executives are walking away with millions and the taxpayers are left holding the bag.
There is no constitutional authorization to use taxpayers’ money to save Freddie‘s Fanny and AIG, and I think President Bush knows that. This is what happens when politicians ignore the Constitution and expand their powers far beyond what the law of the land intended. They have upset the balance between the Constitution and the economy. President Bush could be impeached for doing this. The government’s chickens have come home to roost, and the eggs they will lay are not pretty.
It is the same callous disregard for the Constitution that prompted President Bush last week to declare that residents of Galveston will be reimbursed for their evacuation expenses by the taxpayers. Once again, President Bush intends to draw taxpayers' money from the treasury to provide charity for those dislocated by hurricane Ike, in a clear violation of the Constitution. This is not conservative, or even Republican philosophy, but Bush is no conservative and never has been. If government wants to give money out as charity, then it should be obtained through voluntary donations, not through taxes.
However, when it comes to bailing out Freddie’s Fanny, guess what - we don’t have a trillion dollars to spare for these bailouts which ultimately could run as high as $2 trillion. We don’t have anything to spare because this nation has been practicing a policy of living on borrowed money for decades. We tend to spend everything we have, then borrow more so that we can spend more. This foolish policy extends from low income households to the highest levels of government. It is the most misguided and irresponsible money management policy in history. The time to pay the piper is coming due.
What has brought us to this point with the mortgage and banking industry is much too complicated to explain in this article, but Vincent Gioia has an excellent explanation of how and who got us into this mess
It’s not just that the Bush Administration wants to put another Band-Aid on the problem; it’s also that they want to rush their proposal through Congress before anyone really has a chance to study it. They have talked up the situation to make it sound like a national emergency that will collapse the economy if it isn’t done immediately. They could be right. Fanny and Freddie have been frozen since last week which will have a trickle down effect on all credit borrowing. Even the bailout may not fix the problem and some experts expect that credit is going to get very tight in the near future which will lead to other commercial collapses.
This is what we need to understand, and the point was made quite clear by Henry Paulson on the Fox News Sunday program. You will not lose the money you have saved in a bank account, provided it is under $100,000 in any one FDIC insured bank. The stock market will not crash as it did in 1929 although it may dip for a while, it will recover. However, some business failures resulting from the credit crunch could render some stocks worthless. If the holes in our credit industry aren’t plugged, our money could soon become worthless.
These bailouts will raise our national debt almost to the level of our GDP. When that happens, the country will lose its prime credit rating in the world and borrowing more money from foreign countries will be too expensive. We have to cut our costs drastically, and that means government spending must be cut to the bone. We will be lucky if we can still afford an army.
Contrary to Paulson’s repeated reference to “protecting the taxpayer,” this bailout is not designed to protect the taxpayer at all. It is designed to protect bankers, mortgage company executives, politicians, and especially a misguided credit system that promotes constant and excessive borrowing. I have never agreed with Bush’s economic policies, but this takes the cake. The fact is that either we nationalize (socialize) these lending companies with bailouts now and let the chips fall where they may, or we do nothing and watch the economy collapse quickly as the money lenders go out of business. This is the ultimate result of decades of living on borrowed money, something conservatives have always opposed.
Throughout his tenure as president, Bush has been staving off recessions by inflating the economy, printing up more money, and promoting the practice of borrowing and living on borrowed money with his “ownership society“ policy. To save any business or industry from failure, Bush simply borrows money from Peter to pay Paul. He doesn’t want any recessions on his legacy and seems willing to do anything to prevent it while passing the costs on to future generations. But it isn’t only Bush.
Politicians in Washington are capable of looking no further down the road than the next election. They never see the forest through the trees. If they have to plunge the country into debt to make themselves look good to their constituents to get reelected, then that is what they do. This is what we have come to now - the destruction of our own economy from buying votes with handouts and entitlements of the taxpayers’ money. It’s an understatement to say that these people in Washington are a pack of bumbling idiots, incapable of running a hot dog stand, let alone the federal budget and government.
If Washington is going to start merging with private companies, then it might be a good idea to contract out control of the federal purse strings to a private firm and let them manage the budget like a business. If politicians aren't going to respect the Constitution anyway, then privatizing control of the national budget couldn't be any worse. Congress has clearly shown it cannot be trusted to manage the public treasury in a responsible manner. I have no doubt that the Heritage Foundation could do a much better job of it.
Americans, and especially the U.S. government, need to learn to live within their means. Congress has been setting a very poor example for the country with their persistent, and excessive overspending while running up both the budget deficit and the national debt. Too many Americans have been doing the same with excessive borrowing and credit card charges to buy things they really can’t afford. We have become a country of debtors and consumers instead of producers. That needs to change.
Paulson, perhaps unintentionally, made it clear that part of this bailout proposal was to assure that the irresponsible and excessive borrowing and credit policies and practices would continue. As long as we fail to hold accountable, those responsible for these failures, the bad business practices will continue. If money lenders are assured by the federal government that they will be bailed out when their businesses fail (which is exactly what the Bush-Paulson-Bernanke proposal does), then the problem will never be corrected. This habit we have of living and running businesses on borrowed money, buying houses and cars on credit that we really can’t afford - creating debt that is never paid off must stop.
Fanny Mae and Freddie Mac would never have reached this point were it not for the cooperation they received from Politicians in Washington. First it was Bill Clinton who forced Fanny and Freddie to take high risk loans from minority buyers with no or poor credit. Then there were the Clinton cronies who sat as chairmans and on the boards of Fanny and Freddie and took home millions of dollars.
Then came this current bunch in Congress who are the top recipients of kickbacks… uh, “campaign contributions” from lobbyists of Fanny and Freddie in this order: Chris Dodd - chairman of the Senate Banking Committee; Barack Obama and the Black Caucus; John Kerry - member of the Senate Finance Committee, Barney Frank - chairman of the House Financial Services Committee. These are the primary politicians who have protected Fanny and Freddie from audits and scrutiny in exchange for a piece of the mortgage pie.
"The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren't minding the store." "Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression." - Barack Obama, who has been a big part of the problem is now attempting to shift the blame to others - primarily Republicans. We can’t let him get away with this.
The real culprits behind the financial crisis are primarily Democrats which include the Clintons, Chris Dodd, John Kerry, Barney Frank, and Barack Obama, all of whom either helped craft the policies for banking institutions to follow, or profited from them. We are now seeing exactly what the Obama economic policy would lead to if he were elected to POTUS. In his campaign speeches he now says that the answer is more federal regulation of private industry. Just remember that it was Democrats at the helm of Fanny and Freddie and Democrat crafted federal regulations that led to this financial crisis in the first place.
President Bush tells us that Fanny, Freddie, and AIG are too big to fail. Perhaps the only federal regulation needed is one that assures that no privately owned company ever becomes “too big to fail.” The bigger they are, the more money they have to buy corrupt politicians like Chris Dodd and Barack Obama. Perhaps this is another reason why Americans traditionally elect governors to the presidency, rather than Senators.