First Take: Bush throws GSEs under the bus

Forget everything else about how the current financial mess could hurt everyday Americans, which it could. My jaw fell to the floor when I heard the President, attempting to explain the current mortgage/financial debacle to everyday Americans on Wednesday night, throw both Fannie Mae and Freddie Mac under the proverbial bus. “Fannie Mac and Freddie Mac … fueled the market for questionable investments,” Bush said. Read that again. And then remember that this mess started with a private-party securitization party that left the GSEs gasping for air, and market share. Either we’re witnessing political agenda-setting at its worst, or simple ignorance by an administration that has seemingly consistently failed to understand the nature and reach of this crisis. Neither is what should be fueling a desire to provide Treasury with $700 billion to buy assets nobody can price. If you want to know who fueled this mess, look no further than the carnage of independent investment banks like Bear Stearns, Lehman Bros., and others like them. Those still standing (namely, Goldman and Morgan Stanley) are now, conveniently, commercial banks — or have merged with one — and they will benefit enormously from this bailout program. Or look at our own government all the way back to 1992; pushing housing has been a favorite political pet since Bill Clinton first ran for office, and Republicans only furthered the theme since that time; noteably, the current Bush administration’s own push for “the Ownership Society” comes to mind. I’m convinced that the credit markets stared into the deep last week, and the sort of financial ruin that can topple economies was just over the horizon, but it’s time we questioned more directly how we got here. Why nobody saw AIG coming. Why the plug was yanked on Fannie and Freddie despite both verifiably being a going concern. Why Lehman was allowed to plunge markets into chaos, while Goldman and Morgan Stanley cruised into a commercial bank charter just a few days later. I will tell HW readers this: at this point, regardless of whether this bailout package passes or not, both we and our children — and possibly our children’s children — will be paying for this mess. And the price tag is anything but the $700 billion being bandied about inside the Beltway.