It's not the role of any business to be a ward of the state. Former vice president and economic adviser at the Federal Reserve Bank of Dallas Gerry O'Driscoll reckons the best thing for multi-trillion dollar failures Freddie Mac and Fannie Mae is not to bail them out, but to let them fail. The Federal Reserve's bailout plan, he points out, is totally without any protection for taxpayers.
They'll fund the downside if losses mount at the two mortgage giants. But if Fannie and Freddie recover, stockholders and management gain. Call it "casino capitalism" - taxpayers bankrolling management high rollers.
The plan doesn't ask stockholders or management to suffer for their financial indiscretions. The players who put their companies in jeopardy get to stay in charge - Paulson says he isn't looking for "scapegoats." Someone should remind him that capitalism without failure is like religion without sin.
UPDATE: Yaron Brook from the Ayn Rand Institute recommends reading the Wall Street Journal's "revealing opinion piece, 'The Fannie Mae Gang,' by editorial page editor Paul Gigot, a longtime critic of Fannie Mae and Freddie Mac.
"Gigot's piece is a devastating expose of how these quasi-governmental behemoths concealed their shady practices and shaky finances by enriching powerful friends on Wall Street, Main Street, and Pennsylvania Avenue," said Dr. Yaron Brook, executive director of the Ayn Rand Institute.
"Gigot's account should lay to rest the idea that 'public-private partnerships' such as Fannie and Freddie bring valuable new assets to the free market. In fact, the government's only contribution to the market is to forcibly take some individuals' money and freedom for the sake of others.
"Fannie Mae's 'public-private' goal of 'promoting home ownership' turned out to mean nothing more than handsomely rewarding reckless lenders by forcing taxpayers to bail them out. Any proposal for how to clean up the Fannie Mess must seek to phase out and eliminate the twin housing monstrosities--not prop them up."
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