Thoughtful well-crafted guest commentary in yesterday's Salt Lake Tribune, by the Heritage Foundation's J.D. Foster. Mr. Foster offers a proposed solution to the impending Fannie/Freddie bailout mess, and frames his opinion piece like this:
News that the Treasury is preparing plans to bail out housing finance giants Fannie Mae and Freddie Mac (FM2) has infuriated the American people. And rightly so: It's their money, after all, on the line. If they understood the whole truth, they'd be even angrier - but they should vent their fury at the guilty parties.Foster then launches into a nice mid-article rant about entities which are deemed "too big to fail," and the all too obvious "seeds of trouble" (enormous size, inadequate capitalization, single industry focus, heavy political involvement) which were blindly ignored by the one governmental body which had the political power to have prevented the Fan/Fred problem from descending into its current crisis condition. Anger's OK, says Mr Foster, so long as it's properly directed:
Americans should direct their anger at Congress, which for years refused to heed the warnings, even as it worked to protect its gravy train of political contributions.And finally Foster arrives at his proposed solution:
Anger isn't enough, however. As Congress readies a bloated housing bill, Americans should demand Congress ensure this kind of financial threat never looms again. Strengthening the federal regulator for FM2 is fine, but we really need to break these financial goliaths into many, much smaller and truly private companies. Unfortunately, there isn't time now to scheme the breakup of FM2 properly. Instead, Congress should separately task the General Accountability Office and the Federal Reserve with producing a study with its recommendations on how FM2 might be restructured into a variety of private, separate companies. Once cut down to size and properly regulated, these new companies would pose little risk in and of themselves, would never become too big to fail, and so would lose their implicit guarantee of a future bailout. It's not enough to call in the ambulance. We need to catch the mugger who perpetrated this crime-and make sure he never haunts the neighborhood again.Not a bad editorial all in all; and definitely worth a read. This is the kind of mental exercise recommended to shake out the weekend cobwebs on a Monday morning, we think.
And what think our gentle readers about all this?
