The big news yesterday was the U.S. government's takeover of Fannie Mae and Freddie Mac. My response? Ho-hum. The international community holds about 5 trillion (yes, that's a "t") dollars of Fannie Mae debt, according to today's WSJ. Of course we had to bail them out, if we ever wanted to see a single yen or yuan buying American paper.
(For more on this, read http://www.blacklistednews.com/news-1459-0-13-13--.html)
In short, we didn't have a choice. What's really scary is politicians are talking about bailing out GM and Ford. I predicted a Ford and GM bankruptcy months ago, but there is no reason for the government to bail out Ford or GM--they are private companies who decided to focus on manufacturing SUVs right before oil spiked. While taxpayers may have an interest in ensuring their neighbors don't lose their homes--vacant lots of homes are terrible for cities and states--ensuring your neighbor gets service for his Hummer is a different matter entirely.
If the U.S. seriously talks about bailing out GM and Ford, the American dollar will have officially become the world's doormat. (I earlier compared the dollar to the world's prostitute, who kept servicing STD-ridden johns instead of closing the doors to them, but apparently, that analogy was too blunt.) Perhaps we've got a case of financial immaculate conception, where U.S. taxpayers who paid their mortgage bills and taxes on time, still end up with a baby on their hands to support; however, instead of a savior, U.S. taxpayers will apparently be forced to pay for Rosemary's Baby's expenses. Where are three wise men when you need them?
(One of them, Patrick Killelea, is here: http://patrick.net/housing/crash.html)
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