The Conservative Revolution

Watch this video of Republicans and Democrats disagreeing about the nature of Fannie Mae/Freddie Mac problems. Who was right and who was wrong? You decide.

The Wall Street Journal has a great piece today about the breathtakingly anti-freedom move to nationalize the U.S. mortgage industry.

Treasury Secretary Henry Paulson wants to prop up the walking dead so the world keeps buying their mortgage-backed securities. His action may calm jittery credit markets, and it may get the companies through the current mortgage crisis — albeit at enormous cost to American taxpayers. The tragedy is that he and Congress didn’t act 18 months ago — when the cost would have been far less — and that he still isn’t killing the Fannie and Freddie business model that has done so much damage. These corpses could still return to haunt us again.

The taxpayers now are responsible for risk that they should not be responsible for. Instead of abolishing Fannie Mae and Freddie Mac, the U.S. government has decided to take them over. This is a sad day for freedom and for the economy.

The following is one of the best lines from the editors of the Journal.

By far the biggest risk here, however, is that the companies could still emerge with their business model intact. That model is the perverse mix of private profit and public risk, which gave them an incentive to make irresponsible mortgage bets with a taxpayer guarantee.

Exactly. A classic case of the government getting involved in the market, causing a problem, and then making things worse by trying to fix the problem.

The Journal editors smartly conclude:

The Fannie-Freddie bailout is one of the great political scandals of our age, all the more because it was so obviously coming for so long. Officials at the Federal Reserve warned about it for years, only to be ignored by both parties on Capitol Hill. The least we can do now is bury these undead monsters for all time.