Jared Berrnstein has some more informed than I can muster commentary on the Fannie Mae / Freddie Mac situation.
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Fannie/Freddie Info
11 Jul 2008 04:57 pm
Comments (3)
Fannie 'n Freddie were both really results of a decision to privatize direct govt. mortgage assistance programs back in the sixties. You know -- to get them off budget and take advantage of those famous private-sector efficiencies. Wonder how the historians will score that one in the end?
I heard someone else's idea and I thought it was great. If a company takes gov'mnt money for a bail out, all executives must comply with government salary restrictions (which I think top out at around 200K or so - not sure, but it's not Wall ST standards).
There has to be SOME punishment for failing and getting bailed out - aside from all your peers tsk, tsk'ing you.
Comments closed July 25, 2008.
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Heads in the Sand
"But the time to worry about moral hazard is not the weekend when the big bank is failing. It’s years before, when you’re setting up the regulations under which the financial system can flourish without going off the rails."
Where have I heard this before? Jam yesterday, jam tomorrow, never jam today. I imagine this will play out the way every one of these things plays out
- don't do anything to actually reduce the power and privilege of the super rich right now, because we need "confidence in the system"
- a year from now, don't do anything because that was last year's problem and we now have more pressing matter's to deal with
OK, if we don't want to cause panic about "the system", how about we at least institute a punitive tax regime on those who benefit from abusing the system? Heck, make it a purely forward looking tax, starting next year; I don't even insist it be applied to the current miscreants. Note that this would be a tax on individuals, not the system, so it attacks moral hazard at the source and has nothing to do with "confidence in the system".
Yet do we see any interest in such taxes?
Until we have such a regime in place, explain to me exactly how our federal subsidies to the richest .1% of the people in this society differ from the give-away at the end of the Soviet Union.
Posted by Maynard Handley | July 11, 2008 6:00 PM