Those who cannot learn from history are doomed to repeat it.
- - Edmund Burke
The Obama administration, on Christmas Eve, dropped an utterly insane bombshell. Team Obama has used the slowest news weekend of the year to announce that they are uncapping federal guarantees for Fannie Mae and Freddie Mac loans - writing these institutions a blank check with our tax dollars. This from the WSJ:
The Obama administration's decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.
The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each.
Unlimited access to bailout funds through 2012 was "necessary for preserving the continued strength and stability of the mortgage market," the Treasury said. Fannie and Freddie purchase or guarantee most U.S. home mortgages and have run up huge losses stemming from the worst wave of defaults since the 1930s.
"The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," said Rep. Spencer Bachus of Alabama, the ranking Republican on the House Financial Services Committee. He said the Christmas Eve announcement was designed "to prevent the general public from taking note."
Treasury officials couldn't be reached for comment Friday.
So far, Treasury has provided $60 billion of capital to Fannie and $51 billion to Freddie. Mahesh Swaminathan, a senior mortgage analyst at Credit Suisse in New York, said he didn't believe Fannie and Freddie would need more than $200 billion apiece from the Treasury. . . .
Why uncap federal (our tax dollar) guarantees for Freddie and Fannie, particularly when they have the vast majority of funds remaining available to them. At Politico, one analyst speculates that "It's possible we may see some horrendous numbers for the fourth quarter and, thus 2009, and Treasury wants to calm the markets." The other possiblity is more insidious. Hot Air reasons:
It looks as though Obama wants to use Fannie and Freddie as proxies for more social engineering and wants to prepare for them to take more losses as a result. That would be the only reason to completely uncap the commitment to cover its losses. After all, the bailout was supposed to help put the two GSAs back into the black, and at the rate they have used that bailout (assuming no improvement), we wouldn’t have to worry about exceeding caps until 2012. I’d bet that the Obama administration retools its foreclosure prevention programs to have Fannie and Freddie buy up the paper and forgive parts of the principal on the loans, and have taxpayers eat the losses on a massive basis.
Perhaps the biggest travesty of putting Democrats in charge of both houses of Congress is that there has been no investigation into the causes of our economic meltdown. That meltdown, which began with the sub-prime crisis, was proximately caused by massive market distortion resulting from Democrat's social engineering. Bill Clinton, Chris Dodd and Barney Frank were the engines of that social engineering, and the tools they used were Community Reinvestment Act (CRA) regulations to force the lowering of lending standards and the use of Fannie Mae and Freddie Mac to underwrite these risky loans.
The CRA regulations allowed groups like ACORN to sue banks who did not make a proportionate amount of loans to African Americans. It mattered not that the banks could show, in virtually all cases, that loans denied to people of whatever race were denied on legitimate, non-discriminatory grounds. It didn't matter that ACORN could not show that a minority was treated to different standards than a white. All that mattered were the statistics. As an aside, this precise theory has been held, standing alone, as unconstitutional in terms of hiring and fining.
With no official investigation into this disaster, Obama has been free to not merely continue with the poison at its heart, but to further it. A few months ago, proposed financial regulations that would not merely keep the CRA in force, but would double down, expanding its enfocement. And now if Obama is planning to again use Fannie and Freddie as tools of this disaterous piece of social engineering, it will condemn us to repeat history. BOHICA - bend over, here it comes again.