The Observation Deck

Some years ago Barney Frank told us that the potential insolvency of Fannie Mae and Freddie Mac posed “zeroâ€

Hi,
I love to see fiscally conservative people speak out on wasteful spending. At least when they are right. Here, I wonder, why aren't you complaining about the optional war in Iraq? We spend the $100 billion there in a week. Where, sir, is your outrage on that?

Fanny Mae and Freddie Mac are not the problems with our economy. Their a drop in the bucket compared to the misdeeds of the unregulated actions of our banks and Wall Street speculators. Fanny Mae and Freddie Mac didn't take liar loans. They are in trouble because people are out of work. Mr. Frank's problem was he could not imagine our economy being driven so deeply in the ground.

I look back on history and many leaders back then would spend high percents of their country's GDP on building castles for the ruler. Is seems silly. Until, you think we have spent far more than probably all those castles, not to build something, but to destroy another country. I fear the optional war waged by the Bush Administration may have harmed our economy for many years. President Obama needs to end that war as quickly as possible. We need that money to house our people, feed and care for our kids and to rebuild our infrastructure. Think what we could have done for the United States of America with all those trillions of dollars. Health care for everyone? 100% sustainable energy? Employed Americans?

The post below disappeared in the shuffle a couple days ago and now it looks to me like my original post has mostly disappeared. I'll repost, maybe I'll hit the trifecta....

....

It seems like the red herring is the rebuttal tactic of choice around here. Ryan says I'm wrong about the hypocrisy of the so-called stress tests because Reaganomics was bad, now Don says that I should shut up about how Barney Frank is stupidly leading us down the same provably ill-conceived federal “insurance” road because Bush went to war with Iraq....

(By the way I'm not saying Barney Frank is stupid. Barney Frank is smart enough to know that Americans are gullible enough to support stupid initiatives.)

First, for the record, invading Iraq was misguided too. But we didn't invade Iraq for the purpose of destroying their country. We invaded Iraq, rightly or wrongly, for the purpose of securing oil from the Middle East. 911 was a convenient excuse. Frankly, I think Obama figured this out even before his first presidential briefing. He kept the same Defense Secretary, and has taken a “measured” approach to withdrawal and is in no hurry to turn Iraq over to Iran. Sensibly, at least for the time being, considering we are there now. Unless of course you like not having your oil supply cut in half....

And by the way, the cost of the Iraq war is not $100 billion a week, it's $100 billion a year. We have not spent “trillions of dollars” on Iraq. Not yet anyway....

To be honest I'm not sure why Freddy and Fannie failed. My guess is that they failed long before they were seized, but that accounting shenanigans kept them in business for a while longer than they should have been. And in any case they were seized many months before the real surge in unemployment, which began last fall. Fannie and Freddy did not fail because people lost their jobs, they were dead already.

Hi,
Washington Post has the true cost of the Iraq conflict at $3 trillion to date. The depression cost us an additional $1 trillion. See: http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030702846.html

And Mr. Liston, you are correct in saying we are not spending $100 billion a week. Sorry. So, I was wrong on the burn rate but correct on the total cost.

The Washington Post did not say that the war cost $3 trillion dollars. The source you cite is clearly labeled as an opinion piece. And since you're offering mere opinion as proof that the war cost $3 trillion, let me offer an opinion of my own. All these two writers have done is cite a handful of externalities that could be monetized, then pull a number out of a hat.

Understand that I am opposed to the Iraq war. But I am also willing to live with a dramatic run-up in oil prices should we withdraw and Iraq is invaded by Iran. In fact I welcome higher oil prices.

Oh, and the Iraq war did not cause the “depression.” If anything, war stimulates the economy. There are those who say it took WW2 to finally get us out of the Great Depression. Nor did the Iraq war cause higher oil prices as the authors suggested.

But what does the Iraq war have to do with braindead Barney Frank and his stupid idea to have our federal government (that's us by the way) insure state and municipal bonds?

Since my original post seems to have gotten clobbered, I'm repeating it below.

Barney Frank Is At It Again....

Some years ago Barney Frank told us that the potential insolvency of Fannie Mae and Freddie Mac posed "zero" risk to U.S. taxpayers. Frank is the Chairman of the House Financial Services Committee. You'd think after a blunder like that, one that cost around $100 billion taxpayer dollars (a number much larger than zero), that he would no longer hold this job.

Well he still does. And he's at it again. This time he is proposing that the federal government start insuring state and municipal bonds. The problem is, private insurers impose sensible underwriting assumptions to such bonds, so the interest rate that states and cities must pay pretty much prevents them from issuing new bonds to raise money.

Frank has said that federal insurance of state and municipal bonds will result in "zero" cost to U.S. taxpayers. That can only mean one thing. Hold onto your wallet. I mean how can it be that everything else the government has ever insured, like bank deposits, private pensions, homes in flood zones, etc. has cost taxpayers tens of billions, but this one won't? Remember the FSLIC?

The reason states and cities need to raise money (cheaply) so badly is to make good on their woefully underfunded pension promises. Nobody in their right mind is lending money to public entities anymore, given these enormous obligations. Estimates are in the neighborhood of two trillion dollars.

So, just as nobody with money to lend and a measurable IQ will lend to unionized industries anymore, these same people will no longer lend money to public entities. Because most public entities are now insolvent. So what could happen now is another government insurance boondoggle, which will create even more moral hazard, and result in more fleecing of the taxpayers. Eventually. I don't fancy myself a pundit or a soothsayer but if Frank's bill passes, that outcome is as certain as the sun coming up in the morning.

I beseech the folks from Massachusetts to remove this man from office. Maybe you were right about McGovern, we'll never know. But you are wrong about Barney Frank.

PS I believe that the financial bailout is being handled the way it is to shut up the bankers. Because if the facts ever saw the light of day, Frank, Dodd and a bunch of others on both sides of the aisle would be on trial right now. I hear Obama has been dissing the FBI of late. My hope is that the FBI will pay him back by taking the wraps off this thing....

Hi,
OK. Thanks for the clarification. You really aren't posting to complain about our government wasting money. In your opinion, as I read your comments, it is more important to attack Mr. Frank than to worry about spending our tax dollars. I'm sorry. Why didn't I see that Mr. Frank was on the repub talking points hit list.

I just commented because it bothers me when people, that want to attack democrats, complain about some minor thing (although saving our cities and states isn't really that minor - but I say minor because the cost of saving them is minor compared to the cost of an elective war).

I believe we spent $3 trillion dollars on the Iraq conflict, but I'm not surprised that you don't. Party line. If Rush doesn't say it you don't believe it. I believe also that taking $3 trillion dollars and throwing it away will hurt our economy.

You are mistaking me for a what? A Republican? That's a laugh. I've said many times on these boards that I vote Libertarian every chance I get. Put it right out there. Geez if you're gonna call me something, call me something that I actually AM. Plenty of choices there.

It's not about red or blue with me. There is little appreciable difference between the two parties. These guys pretend to be partisan and all that but behind the scenes they are buddy-buddy and all the same. You can't squeeze a dime between their beliefs.

Maybe I need a bumper sticker that says “Don't blame me I voted for Bob Barr.” Because I wanted change, not more of the same. Not Robert Gates, Larry Summers, Ben Bernanke, Goldman Sachs, Hilary Clinton, Tim Geithner and the Trilateral Commission running the country. The ones Obama appointed.

What this is about is yet another surefire boondoggle that is being sold to us “without cost,” but will eventually cost hundreds of billions. It's about further entrenchment of moral hazard. And that despite the absolute inevitability of serious financial consequences, we'll fall for it. Democrats will let it happen. Republicans will let it happen. And they are both either stupid or they don't give a darn about your and me. You tell me Don. My inclination is to say the latter.

I'll make you a deal. If you don't make me repudiate the Iraq war before I comment on Barney Frank's next scheme to waste taxpayer dollars, I won't insist that you repudiate automobiles before you comment in the Iraq war. After all, cars kill more people and damage our country more than the war in Iraq ever will.

No I don't think we have spent $3 trillion on the war, not yet anyway. But it's not because I am a Republican any more than I am a spider monkey. We probably will spend $3 trillion and maybe more because we are going to be in Iraq indefinitely. No matter what Obama said in the campaign, he is not going to get us out.

The cost of saving our states and cities not "minor." It is already in the trillions. Just the underfunding of public employee pension plans has been estimated at $2 trillion. Add to that the cost of their looming budget deficits, state, city, county, public education, etc. and there's probably another trillion, maybe much more. Just a guess there.

Donald Farris wrote:Fanny Mae and Freddie Mac are not the problems with our economy. Their a drop in the bucket compared to the misdeeds of the unregulated actions of our banks and Wall Street speculators. Fanny Mae and Freddie Mac didn't take liar loans.

You are wrong. Here is just one article that gives us a hint at what went on:

http://www.washingtonpost.com/wp-dyn/co ... 03459.html

The money quote is:

"The two federally chartered mortgage-finance companies, whose ties to the government give them commercial advantages, are required to devote certain percentages of their business to funding loans for various categories of borrowers, such as homebuyers with low to moderate incomes and those in poor neighborhoods."

The federal government established a quota system that required banks to make loans to people with poor or non-existent credit.

When the banks resisted and said, rightly, that much of that money would never be paid back Fannie Maw facilitated the creation of mortgage backed securities so the loans could be sold.

Much of the money Obama gave to AIG was forwarded to the Chinese government and to European banks who purchased those mortgage backed secruities.

There is more but that's it in a nutshell.

Most of the mortgages made during the last few years of the housing boom would never have been made without the inistance of the federal government.

As to the Iraq war:

Without it Sadam Hussein would have nuclear weapons and control of the worlds oil. How much would that cost?