| Jun 17, 2010
Yep it's a line from one of the great movies of all time. The movie had a great name too...
The mortgage firms Fannie Mae and Freddie Mac grew into Frankenstein monsters because of their hybrid nature: private companies with a government backstop.
Their public support has cost US taxpayers more than $100 billion so far.
It was announced Wednesday that their shares were finally being delisted from the New York Stock Exchange.
It is a busy news week. Our attention is directed elsewhere.
The quiet event is a useful reminder of how badly the public-private model worked. All the "reform proposals" to date suggest repeating the same hybrid approach in one form or another.
I am NOT kidding.
Hump? What Hump?
No one ever found a single instance where this approach actually worked in the real world. Oh, its a really popular idea. It's a well-used idea throughout history in one form or another. It does sound so good.
What Are They Thinking?
Why I call this type of post a WATT.
Populist Congressional "demands" for "fair housing" coupled with (once AGAIN) allowing legalized gambling by banks and other financial institutions on their own investments have put most of the people in the industry I love out of work and struggling to survive. If you are lucky enough to still have a "real job" - God Bless You.
Do Not Take the Blame
The True Crime is your representatives KNEW that legalizing gambling by financial institutions has three times (in the last 150 years in the US alone) led to exactly this SAME result. If they claim ignorance, their crime is worse. You know that quote from high school - something about being condemmed to repeat the mistakes of the past.
Too Big to Fail?
I also have to trust that you are smart enough given the events of the last few years to identify that "Big" and "Fail" are words that DO go together rather WELL.
Like many of you, I watched the hearings on the financial/bank crisis last year . Thrilling well-scripted cable drama. Maybe you missed the statements by ALL of the heads of the too BIG to FAIL financial institutions - I'll paraphrase them to spare you the actual script which was worse...
"In the interest of my shareholders...I can't allow the company's assets to be valued at the present time..."
Allow me translate this for you:
"Congressman (Senator), we lost 50% of the asset book value of the company pretty much overnight. We're broke like you. Don't ask me to clarify things or say more.
We'll publically call it a 25% loss and hope everyone buys that long enough for both of us to get in the clear. If you rat on me, I will testify against YOU. Thanks for the loan. The Chinese are good for it. They have to sell the stuff somewhere. See you after the election..."
Do I think its a conspiracy? No.
Failure is never pleasant to face.
Blame is too easy to cast.
That just Makes More Sense to me.