mr smith

Bailout Turning All Banks into Freddie/Fannie

by Cord Blomquist on November 24, 2008 · 2 comments

in Bailout Watch

Freddie Mac & Fannie Mae were the catalyst for our current financial crisis. By buying up risky sub-prime mortgages, Freddie & Fannie encouraged banks to make risky loans to folks who otherwise wouldn’t have received mortgages.

Freddie & Fannie did this because they had the backing of the U.S. Treasury.  The executives at Freddie/Fannie knew that if they made a bad move and lost billions in the market, the government would bail them out.

This notion was laughed at a few years ago by Rep. Carolyn Maloney (D-N.Y) when Fred L. Smith, the president and founder of CEI, suggested that Freddie & Fannie might use more than their allotted line of credit at the Treasury.  Maloney scolded Smith and said of what was then a $2 billion credit line:

It is really symbolic, it is obsolete, it has never been used,

Mr. Smith responded that it was still important to repeal any such promise of credit from the Treasury, stating:

As long as the pipeline is there, it is like it is very expandable. It is only $2 billion today. It could be $200 billion tomorrow.

Fred was wrong, but only because he underestimated. Freddie & Fannie took more than $300 billion of our tax dollars for their foolish decisions.

Now it seems that every bank in the country is backed up by the Treasury.  Look no further than the Citigroup and its bailout.  Citi has already received $7 billion in taxpayer dollars and will now receive a possible $300 billion more.  This is sounding a lot like a sequel to Freddie Mac and Fannie Mae, and yet this is a private business, not a “government sponsored entity” like Freddie/Fannie.

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Liberals Against Libertarians

by Fred Smith on October 15, 2008 · 5 comments

in Bailout Watch, Economy

That liberals wish libertarians to go away is, perhaps, not surprising. But the issue is much more serious than even Jonah Goldberg realizes. McCain’s championing of “getting the monied interests out of politics” and Obama’s pledge to eliminate their influence both amount to an attempt to eliminate economic interest groups (and, indeed, interest groups that are in any way allied with economic interests – such as independent free market groups) from politics. But, politics is about interest group influences. If economic interest groups are eliminated, only ideological groups are left – right and left groups driven by cultural, ethnic, environmental or other religious values. Is that world likely to prove more tolerant, more compassionate, more “concerned?”

My personal vision of the future is to find myself about to testify in Congress on some creative expansion of the state. As I’m about to testify, the chairman speaks up: “Mr. Smith, before you begin, I have a question I’d like you to answer. Are you now or have you ever been associated with the wealth producing sector of the United States?”

A world where economic interests are disenfranchised – indeed, even de-legitimized – is a world that will have little regard for economic – and, thus, indivdiual – liberty.

Ideologues have created far more horrors than have even the most rampant of business villains. My understanding is that Stalin, Hitler, Pol Pot and Mao Tse Tung were not motivated by profits.