Government seizes control of GSEs ('Grand Social Experiments'?)

WASHINGTON (Reuters) – The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae (FNM.N) and Freddie Mac (FRE.N), in what could be the biggest federal bailout in U.S. history in a bid to support the U.S. housing market and ward off more global financial market turbulence.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," U.S. Treasury Secretary Henry Paulson said at a news conference. "Fannie Mae and Freddie Mac are critical to turning the corner on housing."

The two companies, publicly traded but also serving a government mission to support housing, were put in a conservatorship that allows their stock to keep trading but puts common shareholders last in any claims.

Their top executives were ousted. Freddie Mac chief executive Richard Syron and Fannie Mae's CEO, Daniel Mudd, were replaced by David Moffett, a former top official at US Bancorp (USB.N) and Herb Allison, a former top official at both Merrill Lynch and pension fund TIAA-CREF.

In addition, the U.S. Treasury will immediately take $1 billion equity stakes in each company that could grow to be as large as $100 billion each and which would be senior to both existing preferred and common shares. The senior preferred stock in each GSE will carry warrants that will give the government an ownership stake of 79.9 percent.

It is a common fallicy of Conservatives to think that the government does nothing right. That the government is wholly incompetent. This is an outright lie and that you believe it just goes to show you like to stroke your own ego rather than believe what is true.

The government does quite a bit well, but that does not mean it should do everything. Many government programs are competently run. Government needs strict oversight and needs a tight leash or it will run roughshod.

The government suffers from inefficiency and redundancy. The private sector suffers from fraud and greed and. The government rarely suffers from problems of fraud and greed that can create calamity in the private sector. This entire housing bubble and related credit crisis is a private sector problem and the pains we are paying for it is a private sector problem.

It is very easy to spout the libertarian lie that no government is good government. The reason I am a Republican is that I believe that “who governs least governs best.” But I see a role for government. I’m not a libertarian. Libertarians would soon see the anarchy that lack of government brings. It would be might makes right and a very ruthless world. Maybe you want that.

The dark ages were very Libertarian. No rule but the Lord of the local Feifdom from what he grabbed by his strong right hand. Between you and me, I like not being a serf.

The entire US military is a government run operation. I suppose you think the private sector could run it better.

Facts are stubborn things. Plenty of elements of the government are run competently, and plenty of contemporary financial institutions in the private sector are incompetent, and several were or are outright crooks.

Ideologues pretend that how something fits in their neat morality tail in the way they must be, and therefore that all businessmen are enterprising, all investors confident, all inventors homespun down to earth practical genuises, etc etc, while those in the black hats are stumbling boobs. But anyone with brains rather than pudding between their ears and the slightest practical experience of the world knows this is a flaming conscious lie. Human individuals vary, some are smart and others idiots, some are conscientious and some are crooks, and the lesser sort wind up in positions of trust and standing, and the better in places your silly ideologies will tell you to despise.

So much the worse for your fairy tales. Conservatives know that the moral and merit reality of the actual people involved, as human individuals, determine the truth of the matter, and not which color hat this or that party wants to put on entire human classes and professions. Conservatism isn't an ideology, it is instead a standing recognition of the eternal reality of human character and its variation across free human wills.

The Marine corps is an exceptionally efficient institution and it is run by the government. So is the Federal Reserve. So was the Manhattan project, the Apollo program, the FDIC, etc, etc. There are poorly run boondoggles as well - just as there are Countrywides and Enrons in the corporate world, priests who are sexual predators and others who live selfless lives, some cops on the take and others who are princes among men, etc, etc. Cartoons are for toddlers. Human reality is messy and empirical and practical, instead.

The military is THE one institution that perforce needs to be run by goobermint. There are a couple of dozen reasons for this, a couple-three of them Constitutional.

It's all very well for you to blithely say ''Government needs a tight leash'' and so forth, but frankly, that's crap in the real world. Goobermint NEVER has had a tight leash in this nation, probably since Lincoln shredded portions of the Constitution in order to preserve the Union. Not criming Lincoln here: he was VERY clear in his views about preserving the Union, and the people (well, the North at least) supported for the most part his tactics. So be it.

Who said the goobermint ''does nothing right''? Not I. I objected principally to the notion of ''competently managed by government'', a phrase that appeared in another poster's mssg.

Your text ''This entire housing bubble and related credit crisis is a private sector problem...'' is so bizarre as to be laughable. The Regress, specifically, with the connivance of a stupid President who signed the bills (said bills being Gramm-Leach-Bliley and the Commodity Modernization Act of 2000), plus the impetus of the race-baiting industry (which is funded by goobermint) caused the housing bubble and supported the runaway spec mkt in real estate, period.

96-97% of people cannot pay cash for a home, possibly more. Therefore, they need credit, they need to be able to borrow. Banks, very sensibly, refuse to lend to people with bad credit, or at best do so with very restrictive covenants. The Regress stepped up in 1999 and said, effectively, ''Bankers, you WILL lend to certain credit-unworthy individuals, or else we will punish you by statute.'' So, guess what, bankers (who are HIGHLY regulated by goobermint, correct?) did put out billions and billions in dodgy loans to credit-unworthy individuals.

Now, the bankers, seeing which way the wind was blowing, thereupon tripped over themselves to lend as much as possible to every bad-credit pissant in the nation, for about 4 years. And, of course, they leant heavily to housing specs, too. The notion of ''no money down'' enjoyed yet another heyday (check out 1923-1924 and the Florida land boom of that period for some interesting history on the original US version of the ''no money down'' bubbles).

Government is necessary, and I quite agree with you regarding Jefferson's famed sentiment. However, and this is one of the few errors the Framers made, government, properly constructed, should only be allowed to perform **necessary** functions, and only empowered to protect the citizenry and the nation from force and/or fraud. Beyond that -- as we are now seeing, over and over again -- government mutates into goobermint, with powers unlimited and damaging one and all by 'virtue' of staggering incompetence.

I really wish you hadn't personalised your comment to me. I've written software for roughly 30 years for both agents of and departments in goobermint. My experience is uniform throughout: goobermint employees are interested principally in not getting fired, not in performing competently the tasks which, usually illegitimately, they have been assigned. They are both narcissistic and risk-averse in the extreme, as a general thing, and -- if they had been any damned good at what they ''do'' in the first place -- would have likely made double, treble, or more doing more or less the same tasks in one or another private company. That they AREN'T doing so in private enterprise tells volumes about their ''competence'', or rather, the lack of same.

This recent financial/real estate bubble is, sorry to say, 95%+ chargeable to goobermint. Goobermint removed backing from currency, goobermint anointed certain private banks to ''manage'' credit and the currency (the Fed), goobermint -- instead of letting the Fed manage credit and the currency -- have decreed from time to time, including this time, HOW to manage credit and the currency on political grounds instead of economic ones, goobermint have systemically abused taxing, borrowing and spending powers granted by the Constitution, and goobermint, all in all, have demonstrated over time that they are utterly unfit to and incapable of running a hot dog stand, let alone the internal credit and currency of a huge economy.

Oh, btw, have you seen what the Fannie/Freddie debacle, and goobermint's handling of it, are doing to the credit and currency mkts tonight, and rate to do for some little time? No, I rather thought not.

Cherish your delusions, boyo. You'll need them, I think, in the very near future.

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