The classy move on the part of the White House to give Fannie and Freddie an unlimited slush fund and dump the news on Christmas Eve is drawing rave reviews as finance bloggers get back to work.
So. Let us summarize:
We do not expect the GSE’s to grow their portfolios at all, so we are fixing the bloated portfolio problem by easing the portfolio caps to permit a quarter trillion dollar expansion thereof.
We do not expect either of the GSEs to need more help from the Treasury, so we are responding to the underutilized $400 billion “lifeline” the GSE’s have with the Treasury ($111 of which is currently used) by expanding it to… infinity.
Oh, and though they have collectively lost nearly $200 billion, we are paying the CEOs around $6 million each.
Great work team! It’s already almost 11:00. Let’s go to lunch.
The issue for Democrats and members of the American Left raised by this article in The Nation is why does Barack Obama allow this situation to continue one day longer? The continuance of Dugan at OCC and Treasury Secretary Tim Geithner at Treasury illustrates how feeble the White House remains when it comes to financial services policy.
Or maybe the problem is one of conflict. Like Larry Summer’s derivatives toxic waste dump inside Harvard’s endowment fund?
And let’s not forget Rahm Emmanuel’s proud legacy as a director of Freddie Mac.
Maybe the Obama White House just can’t go there when it comes to financial anything.
When will Mr Geithner and his colleagues learn that there are no secrets and that transparency and explanation is much better than release of details in the middle of the night. Probably never but there are some of us who will leave our holiday time for a few minutes and keep reminding them. We are scheduled to remind them again on CNBC Closing Bell at 4:30 PM on Monday. CNBC Squawk Box Asia and on CNBC Power Lunch on December 30.
We are getting very used to watching the federal government operate with only the sketchiest information on what it is doing. Most everything seems to be done behind doors and in secrecy. That’s what makes this brief announcement about Fannie Mae and Freddie Mac so troublesome. When the federal government starts talking about unlimited guaranties to cover future losses, our biggest worry ought to be that whatever large number we can contemplate is included under the word “unlimited”, the government has an even larger number in mind.
Notice also how they’ve made an unlimited commitment without consulting Congress. You only need Congressional approval to spend money on wars and healthcare, when it comes to bailing out banks, apparently the Presidency controls the power of the purse all by itself.
But you want health care reform?
Ha! 60 votes.