Sunday, September 07, 2008

Nationalizing Two Mortgage Giants

So it seems that the U.S. government nationalized Fannie Mae and Freddie Mac two mortgage companies created by the government an then "privatized." I put privatized in scare quotes because when the government privatizes anything, they typically do it in such a way as to ensure failure, so as to "prove" that the government should really be in charge. The argument that they are "too big to fail" only reinforces my belief that monopolies are government-created and -enforced entities, and that monopolies would not exist in a free market.

The official line is that these two companies failing would cause too much disruption in the market. But what would these two companies do to avoid total failure? They would sell off many of their assets, including, of course mortgages, to other companies. So those who had mortgages with Fannie Mae and Freddie Mac would continue to have the same mortgages -- only they would be writing the checks to other companies. And if the two companies sold off everything and did go under, so what? All that would mean would be that there would be a burp in the financial market, which would recover quite quickly once everyone saw that their failures wouldn't affect much, since all their assets were owned by others. Further, it would allow smaller mortgage companies to have a change to grow into larger ones. There would be more competition overall, since these two government-created and -supported giants would no longer be around to bully everyone else. The market would adjust, and the mortgage market would be stronger than ever. Now that won't happen.

On top of everything, this will cost the taxpayers literally trillions of dollars. How is requiring more tax money going to help the economy? This is Leftist logic: if you want people to be rich, take more money from them; if you want a stronger economy, reduce its value.

The Bush administration is the one who has done this. This is why I'm a libertarian. The Republicans have stopped even pretending to be pro-free market.
Post a Comment