The REAL reasons behind Fannie and Freddie bailout. Neo-cons wanted to blame Obama.

[Bob Dobbs]

Economist Michael Hudson explains it all and more.

http://www.counterpunch.org/

"The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities. . .

Fannie and Freddie have been loading up on risky mortgages for ages, under-stating the risks largely to increase their stock price so that their CEOs can pay themselves tens of millions of dollars in salary and stock options. . .

The CEOs claimed to pay themselves for “innovation.” In today’s Orwellian vocabulary financial “innovation” means the creation of special rent-extracting privilege. The privilege was being able to get the proverbial “free ride” (that is, economic rent) by borrowing at low-interest government rates to buy and repackage mortgages to sell at a high-interest markup. Their “innovation” lies in the ambiguity that enabled them to pose as public-sector borrowers when they wanted to borrow at low rates, and private-sector arbitrageurs when they wanted to get a rake-off from higher margins.

The government’s auditors are now finding out that their other innovation was to cook the accounting books, Enron-style. As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so – by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed."

Much more at link.

[Wilber_Stool]

1. Excellent article.

Your solution is indeed what is needed, and Mr. Obama has promised to raise the wage and salary limit subject to FICA withholding. I think that an even better idea would be to go back to the original 1913 income tax and exempt wages that merely cover subsistence. I would restore a cut-off point at $102,000 in today’s dollars, matching the terms of America’s 1913 income tax. People earning less would not have to file an income-tax return at all.

Really a must read.

[Bob Dobbs]

2. New link. Counterpunch has moved the article.

http://www.counterpunch.org/whitney09082008.html

[SpiralHawk]

3. Republicons FAIL faster than expected

But at least they are consistent. They always manifest FAIL.

[Bob Dobbs]

4. Can't fail fast enough.

Election fail, this time.