The Housing Bill containing the Paulson GSE bailout plan goes the House floor for a vote today. The bill as written by the Senate has a $4 Billion in grant provision for local governments to buy foreclosed homes directly. The President threatened a veto if this provision is in the final bill but has since retracted his opposition.

Treasury Secretary Paulson is on a crusade to get the bill passed quickly to assure investors both domestic and foreign the credit of the United States is still AAA. It hasn’t worked as well as he’d like since at least one sovereign fund, the KIA, stated recently they won’t be buying anymore GSE debt.

The $4 Billion for direct foreclosure purchases will remain in the bill according to Speaker of the House Pelosi and House Financial Services Committee Chairman Barney Frank.

Too Many “Firsts”

The bill allows the Treasury to directly buy stock in both Fannie Mae and Freddie Mac (a first), to provide seemingly unlimited lines of credit (another first), and to open the Fed discount window to both GSEs (and a third first). Never in the history of this country were these meddlings in private companies and markets allowed. It also provides for a strong regulator which hasn’t been defined and seems like “too little too late” if you ask me.

Some are estimating the bill could cost taxpayers at least $25 Billion. However, the same problem Wall Street is having determining the extent of the bad loans in their portfolios would plague the Treasury in determining what it would cost to back the GSEs as well. The final cost for the over $5 Trillion loans in the GSEs portfolio could top out over $100 Billion.

That’s a lot of cheddar baby!

The Double Standard

And yet the American public seems rather oblivious to this double standard. The double standard that you or I would not be afforded. If we risk our capital and lose, we go under. No government subsidy or bailout is in the offing.

If Fannie Mae and Freddie Mac takes wild risks, reap ungodly profits, make literally billions of dollars only to find later the profits were an illusion and millions of homeowners, shareholders, and world-wide investors got hoodwinked, they get bailed out.

The governments response: “No problem. Here’s $100 Billion…just don’t do it again!”

Unbelievable!

Paulson believes the GSEs are “too big to fail”..and I believe if that is true, then they are too big to bail as well. If the GSEs were rogue mortgage security creators then keeping them alive won’t instill confidence with our foreign investors…they, just as I, will be wondering when they’ll do it again.

If the Federal government can be held hostage by two private companies, the ransom we pay this time will only pale in comparison to the ransom they ask for next time.

Just Like The War

There is no political leadership on this bail out. All, Democrat and Republican, conservative and liberal, are asleep at the switch. If the Democrats get their measly $4 Billion to “help out the little guy” then they’ll give Paulson a blank check to spend $100 Billion…with no end in site.

Does anyone really believe two stock exchange traded companies with shareholders and investor crying for more profits won’t dunk Paulson’s head in the toilet again and again like some high school bully once they know they “own him” like this.

Since American home owners are going under by the millions, the GSEs should be allowed to go under too. What’s good for the goose is good for the gander.

When are Americans going to stop allowing their government to get “bullied” by both foreign oil-producing cabals or domestic financial cabals? As a parent if you give your child lunch money only to have it stolen by the school bully, sooner or later you have to step in.

It’s time for us to step in…teach our kid to fight back, to say “No More, I’ve had enough!” Standing up is the only way to stop the bully.

I am ashamed of how much of a “wussy” government we raised…it’s time for some tough love. It’s time to get off the couch and teach this government a thing or two about pride.

Good Luck!

UPDATE: July 24, 2008

The Housing passed the House on a 272-152 vote, and must go to the Senate for their approval which is expected in a matter of days. The Washington Post reports a few Senate Republicans have requested their bill contain a provision stating the GSEs could no longer lobby Congress. Since the GSEs spend millions of dollars a year doing just that, I don’t see that as a bad provision.

However, it is unlikely that will be included in the Senate version. When have Congressmen voluntarily thwarted being woed by deep-pocket lobbyies?

Uh…never

Plus Senator Reid wants this passed fast…so amending the bill would mean sending it back to the House for another vote…really unlikely.

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