As Taxpayers Prepare to Bail Out Mortgage Lenders, Giuliani Prepares to Enter the Real Estate Biz

An old college bud of mine just blogged this--fun reading!

Let's Whack Fannie Mae and Freddie Mac!
July 26 7:38pm

For those of you who have asked why it has been so long since I have written, I have been busy with taking care of my son, commuting 3 hours a day to work and buying a house in New Jersey. In honor of my new home state, I would like to order a hit on Fannie Mae and Freddie Mac.

I do not want them bailed out or restructured, but killed.

I am sick of watching the gang of Ben Bernanke, Hank Paulson, Chris Dodd & Barney Frank (your gang of idiots may vary by region), act like George Bailey’s corrupt and evil twin.

(imagine Jimmy Stewart here) “Well Fannie and Freddie don’t have your money, you see, it’s in Jim’s house and Steve’s house and all those unoccupied houses in California’s Central Valley, and Las Vegas and Florida. And they’re all good for it, we swear.”

Get this straight, Fannie and Freddie were buying as much as 50% of private mortgages in some years, what are the odds that it’s all good debt?

So then they go on about Fannie & Freddie’s “mission” of keeping borrowing costs low, as just one more excuse to stay on the brilliant course we are on. Sure, we absolutely should focibly commit the US taxpayer to enabling yokels with credit issues to borrow more than is reasonable at rates that are lower than they deserve. But, I do recall that the US already has a “mission” something about “life, liberty and the pursuit of happiness” and I also recall something about the “enumerated powers” of Congress, I just don’t remember where mortgage schemes fit in.

But then our gang comes back with the concerns of their investors. After all, those Freddie and Fannie bonds are in the hands of hardworking Russians, the Chinese Central Bank, and all those pension funds. All those poor people wanted to do was to get a few extra basis points in yield without having to take on any extra risk, how can we let them down?

Actually, I think the Fannie and Freddie bonds are held by a bunch of people who know that not one of Ben, Hank, Chris & Barney could find their balls using both hands and a high powered microscope.

Anyone who wanted the extra yield from GSE bonds knew full well that they were not treasury bonds and since, under the capitalist system we used to use, higher return accompanies higher risk, anyone who invested in GSE bonds should accept the risk of default. For the most part, they were all professional investors, nothing like when your Grandma was buying tech stocks in the 90s.

And if you were dependent on a pension fund run by someone that dumb, perhaps you could take both hands and a high powered microscope and try to find your brain. Seriously, how could anyone think that a company that offers such crappy cars as General Motors and such crappy service as United do a great job with a pension plan?

But wait, we can just give Fannie & Freddie access to the Fed’s discount window! That will keep them solvent! Right, and what are they going to use for collateral? The receivables on a set of mortgages in Stockton? What they’re going to do is enable Fannie and Freddie to give the Fed wampum for actual dollars, thus enabling Fannie and Freddie to indirectly print their own money until the unoccupied real estate they bought is worth the dollars they think it is.

We should kill them before they pull this off - kill Fannie Mae and Freddie Mac to save US Buc.

By the way, should you want to call “bullshit” on this system and short Fannie and Freddie, you can’t, the SEC will pull a Tony Soprano on your ass.