Dissolve Fannie And Freddie
Saturday, 19. July 2008, 14:07:17
Finally some sensible commentary: Joseph Brusuelas Merk Hard Currency Fund writes in Action Forex.com urging Dissolve Fannie And Freddie specifically he encourages the following:
First, the US Treasury Secretary through the administration should request authorization from the Congress to put Fannie and Freddie under direct Federal supervision. To specifically protect taxpayer interests, the operation of the twin giants should be directly and forever removed from the political process.
Second, the senior management at both Fannie and Freddie should be removed from their positions forthrightly and the Congress should commission and investigation into exactly how both GSE's arranged to avoid the type of transparency that would have avoided such a calamity. Washington may think that it will be able to buy itself out of this one, but once the public gets a whiff of what the costs of the bailout are going to be some very important political actors on the Hill may not be too excited about their future electoral prospects.
Third, the Congress, the Treasury and the Fed should move with all deliberate speed to set up a 21 st century version of the resolution trust corporation. A move to create a new RTC would get out ahead of the curve of the wave of banks that will fail later this year and in 2009. The Federal Reserve currently has a list of 90 banks on watch for failure and it is imperative that the Federal Government begins to get ready for the probability of a wave of failed banks.
Most importantly, the Treasury and the Federal Reserve should make it clear that any regulatory reform in the pursuit of the notion that any firm that is too big to fail, also applies to Fannie and Freddie. The genuine systemic risk threat posed by the failure of the GSE's requires that what remains of them in the aftermath of the crisis be privatized. The public should never again tolerate a firm that operates as a privileged enterprise, free from market discipline and able to shield itself from accountability through the deft manipulation of the political process. The role that Fannie and Freddie carved out for itself in the mortgage market was not one of innovation, service or demand, but rather was obtained vis-à-vis its implicit government guarantee. The failure of Fannie and Freddie is not one of the market, but one caused by a government that remains far too large.
First, the US Treasury Secretary through the administration should request authorization from the Congress to put Fannie and Freddie under direct Federal supervision. To specifically protect taxpayer interests, the operation of the twin giants should be directly and forever removed from the political process.
Second, the senior management at both Fannie and Freddie should be removed from their positions forthrightly and the Congress should commission and investigation into exactly how both GSE's arranged to avoid the type of transparency that would have avoided such a calamity. Washington may think that it will be able to buy itself out of this one, but once the public gets a whiff of what the costs of the bailout are going to be some very important political actors on the Hill may not be too excited about their future electoral prospects.
Third, the Congress, the Treasury and the Fed should move with all deliberate speed to set up a 21 st century version of the resolution trust corporation. A move to create a new RTC would get out ahead of the curve of the wave of banks that will fail later this year and in 2009. The Federal Reserve currently has a list of 90 banks on watch for failure and it is imperative that the Federal Government begins to get ready for the probability of a wave of failed banks.
Most importantly, the Treasury and the Federal Reserve should make it clear that any regulatory reform in the pursuit of the notion that any firm that is too big to fail, also applies to Fannie and Freddie. The genuine systemic risk threat posed by the failure of the GSE's requires that what remains of them in the aftermath of the crisis be privatized. The public should never again tolerate a firm that operates as a privileged enterprise, free from market discipline and able to shield itself from accountability through the deft manipulation of the political process. The role that Fannie and Freddie carved out for itself in the mortgage market was not one of innovation, service or demand, but rather was obtained vis-à-vis its implicit government guarantee. The failure of Fannie and Freddie is not one of the market, but one caused by a government that remains far too large.
WIDGETIZE