Playing On Our Children's Dime

Matt Here.

I'm on the hook for my father's Medicare, and now Alexis will be on the hook for my mortgage. And the beat goes on....

The big news in the financial markets this week is the government take over of the mortgage lending giants Fannie Mae and Freddie Mac. As I understand it, both companies got in over their heads and were facing tough times that would have damaging effects on the entire housing industry and the financial sector as a whole. I get it, we were going to be paying for this for a while, but it seems awfully short sighted to me. Also, there are some interesting details that aren't getting tons of attention, but nonetheless will effect us all for years to come.

With this takeover, taxpayers (ME!!!) are now responsible for $200 billion in loan guarantees. Down in the fine print of the whole deal is wording that congress can now add additional subsidies to keep interest rates artificially low. This is surprising to me because the government has long been involved in guaranteeing loans, but never before in actual loan rates. So now the taxpayers (ME!!!) will be subsidizing their own loans while companies rake in more business. You can certainly expect Fannie and Freddie to spend plenty of money in Washington to make sure this happens, considering they have spent $174 million on lobbyists over the last 10 years.

In essence, this whole takeover is a lot like a bankruptcy, so I would expect to see the bond holders and creditors to receive some compensation because they hold promises of payment, while the stockholders should get wiped out because of the purely speculative nature of stocks. In this situation, the government has the right to claim up to 80 percent of shares, which would drop the price 20 percent of what they are worth now, but only if the government chooses to exercise this option (cue the lobbyists).

Anyways, here's how the Treasury Department spins the story: they are doing it to protect the financial markets and the taxpayers. Really? But isn't this going to cost the taxpayers (ME!!!) a big chunk of change to bank roll? Thank you very much, but I would prefer that you didn't reach deeper into my pockets and mortgage my children's future (not my future, that has already been mortgaged) to bail out private investors and large companies, encourage people who can't afford their reverse-amortizing-40 year-ARM loans, and provide job security for lobbyists. If this is the best they can do with my tax dollars, I think I would rather have it back, please.

On a side note, this is why I support the message of Ron Paul; lower taxes, minimize government, and make people responsible for themselves. How can we expect responsible actions if there is an understanding that the government and taxpayers (ME!!!) will simply swoop in and save the day? Isn't that the kind of irresponsibility that got us in this situation in the first place?