Dark Star

It's hard to know what to believe about the current bailout on the table. What we do know is laid out pretty well by Thomas Sowell below:

Why then is there such a mess in the financial markets? Much of that mess is due to the very people we are now turning to for solutions-- members of Congress.

Past Congresses created the hybrid financial institutions known as Fannie Mae and Freddie Mac, private institutions with government backing and political influence. About half of the mortgages in this country are backed by these two institutions.

Such institutions-- exempt from laws that apply to other financial institutions and backed by the implicit promise of government support with the taxpayers' money-- are an open invitation to risky behavior. When these risks blew up in their faces, Fannie Mae and Freddie Mac were taken over by the government, costing the taxpayers billions of dollars.

For years the Wall Street Journal has been warning that Fannie Mae and Freddie Mac were taking reckless chances but liberal Democrats especially have pooh-poohed the dangers.

Back in 2002, the Wall Street Journal said: "The time for the political system to focus on Fannie and Fred isn't when we have a housing crisis; by then it will be too late." The hybrid public-and-private nature of these financial giants amounts to "privatizing profit and socializing risk," since taxpayers get stuck with the tab when high-risk finances don't work out.

Similar concerns were expressed in 2003 by N. Gregory Mankiw, then Chairman of the Council of Economic Advisers to President Bush. But liberal Democratic Congressman Barney Frank criticized Professor Mankiw, citing "concern for housing" as his reason for supporting Fannie Mae. Barney Frank said that fears about the riskiness of Fannie Mae were "overblown."

Maxine Waters and other members of the Congressional Black Caucus have also been among the liberal Democrats defending Fannie Mae. Just last year, Senator Charles Schumer advocated legislation to allow Fannie Mae and Freddie Mac to increase their already huge role in the mortgage market. Republican Congressman Mike Oxley has also defended these hybrid financial giants.

Both Fannie Mae and Freddie Mac have been generous in their contributions to politicians' political campaigns, so it is perhaps not surprising that politicians have been generous to them.

This is certainly part of "the mess in Washington" that Barack Obama talks about. But don't expect him to clean it up. Franklin Raines, who made mega-millions for himself while mismanaging Fannie Mae into a financial disaster, is one of Obama's advisers.

As a Conservative, I'm inherently against this bailout. It looks like socialism to me. What are our other options? I don't know. But one preventative measure we can take is getting a Republican majority back in congress.

Conservatives have to hammer home the points that Sowell (and others) make about who was in charge, who did what and where the blockages to reform came from.

It was all from the Democrats. And they've effectively put the country in a situation where the big "solution," is to have the federal government nationalize huge swaths of the economy. You think they mind? If you think they mind, you're wrong. The only problem they are having is giving the bailout money to Paulson, when they would rather have 1 trillion to spend however they see fit.
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