Shareholders in these government-sponsored enterprises, GSEs, lost half the value of their shares in a space of two weeks in the recent melt-down. That affected plutocrats as well as average Jane and Joe citizen. These GSEs together hold cash reserves of $80-90 billion. Sound like enough? Well not quite; by 80% it is not. These BSEs need some $400 billion to adequately back their combined portfolios of six trillion debt. This is more than the treasury could hope to bail out.
There is a solution that is a non-solution. Congress will open a credit line of $300 billion for them at the Fed's discount window. The government will also buy stock in the corporations--with our tax dollars.
Lawrence Summers, former US Treasury Secretary was blunt in an interview with NPR.
| "If the companies make a profit, it goes to the shareholders.... If the company's not able to meet its obligations, then the government meets the obligation." It is, Summers said, "...the privatization of gain and the socialization of loss." |
[This process has now begun, 06 Sept 2008.]
That is not all. Freddie Mac made some political contributions to five Democrats and five Republicans. Through June 2008:
- Senator Dodd--$28,000
- Senator Clinton--$17,000
- Senator Obama--$17,000
- Senator Alexander--$9,000
- Senator Bennett--$8,999
- Senator McCain--8,100
- Senator Reid--$7,500
- Representative Davis--$8,999
- Representative Boehner--$8,000
- Representative Pelosi--$7,500
There is a cure. One that has been proven:
Come January, the new government will have some serious thinking to do and actions to take. If our financial system collapses as it did in 1929, we can forget about oil imperialism or leading any war on terror. We will be our own worst enemies.
Quotes from The Washington Spectator, Aug 2008.
[ http://www.washingtonspectator.com/]
As for this election candidates, McCain would have both entities privatised. Obama is a bit more flexible. In a Washington Post article, he has this to say: "I think long-term what we have to do is, we have to go ahead and make a decision, if these are public entities, then maybe they ought to get out of the profit-making business," Obama said at a campaign appearance in Davenport, Iowa. "And if they're private entities, that we don't bail them out." He added: "We're going to have to structure that carefully how we make that transition in order that we don't get the housing market even more spooked than it already is."
Either way, something will give.
See Economic Gap for more on how plutocracy works.
Posted by RoadToPeace on Thursday, August 21, 2008.
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