The Most Deceitful Form of Socialism

[BruceWayne]

Thought this was interesting
FT.com | Willem Buiter’s Maverecon | Time for comrade Paulson to pull the plug on the Fannie and Freddie charade

Excerpt:

There are many forms of socialism. The version practiced in the US is the most deceitful one I know. An honest, courageous socialist government would say: this is a worthwhile social purpose (financing home ownership, helping my friends on Wall Street); therefore I am going to subsidize it; and here are the additional taxes (or cuts in other public spending) to finance it.

Instead the dishonest, spineless socialist policy makers in successive Democratic and Republican admininstrations have systematically tried to hide both the subsidies and size and distribution of the incremental fiscal burden associated with the provision of these subsidies, behind an endless array of opaque arrangements and institutions. Off-balance-sheet vehicles and off-budget financing were the bread and butter of the US federal government long before they became popular in Wall Street and the City of London.

The abuse of the Fed as a quasi-fiscal agent of the federal government in the rescue of Bear Stearns is without precedent, and quite possibly without legal justification. The creation of the Delaware SPV that houses $30 billion worth of the most toxic waste from the Bear Stearns balance sheet (with only $1 billion of JP Morgan money standing between the tax payer and the likely losses on the $29 billion committed by the Fed to fund the SPV on a non-recourse basis) is the clearest example of quasi-fiscal obfuscation I have come across in an advanced industrial country. The decision by the Fed to ‘invite’ the primary dealers and their clearers to collude in the (over) pricing of illiquid collateral offered by the primary dealers to the Fed at the newly created TSLF and PDCF (by the Fed accepting the pricing/valuation by the clearers of the illiquid collateral) is another example of the abuse of the Fed as a vehicle for channeling taxpayer-financed subsidies to the primary dealers. This form of socialism for the rich is therefore well-established.

The chair of the Senate Banking Committee, Chris Dodd, has said the Fed and the Treasury were considering opening the Fed’s discount window to Fannie and Freddie. I am afraid he may be right. After all, an injection of the liquidity by the Fed is so much more politically expedient than an explicit fiscal subsidy, even though their economic effect is identical. This would not be a liquidity enhancement operation by the Fed, which would be a legitimate operation for the central bank to engage in. It would be a quasi-fiscal recapitalisation of two insolvent institutions, which is not part of the mandate of the Fed.

The financial assistance offered to US homeowners through the spagetti of federal financial inducements (ranging from the tax deductability of nominal interest payments to the subsidisation of mortgage financing provided by the FHA and the GSEs) is not primarily socialism for the rich. It is socialism for the electorally sensitive, rather like the agricultural welfare state that exists in the US.

So let’s call a spade a bloody shovel: nationalise Freddie Mac and Fannie Mae. They should never have been privatised in the first place. Cost the exercise. Increase taxes or cut other public spending to finance the exercise. But stop pretending. Stop lying about the financial viability of institutions designed to hand out subsidies to favoured constituencies. These GSEs were designed to make losses. They are expected to make losses. If they don’t make losses they are not serving their political purpose.

What we have in the United States is not free-market capitalism, but socialism for the wealthy; government policies designed to privatize the profit, but socialize the loss.

 

[dilloduck]

Thought this was interesting
FT.com | Willem Buiter’s Maverecon | Time for comrade Paulson to pull the plug on the Fannie and Freddie charade

Excerpt:


What we have in the United States is not free-market capitalism, but socialism for the wealthy; government policies designed to privatize the profit, but socialize the loss.

Tax the Rich, Feed the poor, Til there are, no rich no more.

Quicksilver MS

 

[editec]

So let’s call a spade a bloody shovel: nationalise Freddie Mac and Fannie Mae. They should never have been privatised in the first place.

Right ON!

 

[gonegolfin]

Right ON!

They should not have existed in the first place. Phase them out.

Brian

 

[editec]

They should not have existed in the first place. Phase them out.

Brian

You know...I disagree.

Had those mortgage bundling systems been

1. private
2. well regulated to prevent this kind of indifference to the true value of the mortgages

It would have provided local banks the liquidity it needed not to tie up too much of its capital, AND given investors something worthwhile to invest in, too.

Of course the best idea might better to have NOT CHANGED THE BANKING REGULATIONS to begin with.

To keep savings banks in the business of lending locally, such that they would have been more careful about lending and knowledgable about who they were lending to, too.

But then along came the rush to deregulate and here we are now.

Thank you very much Mr. Reagan.

 

[lolly]

What we have in the United States is not free-market capitalism, but socialism for the wealthy; government policies designed to privatize the profit, but socialize the loss.

Bravo. Well said.

 

[editec]

This is the kind of things governments do which give socialism a bad name.

As though socialism hasn't enough inherent problems when its run on the up and up.

 

[Tristan]

They should not have existed in the first place. Phase them out.

Brian

Damn skippy. Farking FDR and his New Deal crappola.


The Injustice of "Doing Something" about Subprime

Summary: As we witness large numbers of defaults on subprime loans--loans extended to those with no credit or bad credit--many are calling for the government to do something to stop the suffering. At the same time, many recognize that a bailout of struggling homeowners would be wrong. Thus, we see a growing list of proposed solutions that purport to save the day without a bailout: "borrower assistance" programs to refinance defaulting mortgages, crackdowns on "predatory lending" practices, or laws restricting mortgages the government deems too risky. In fact, regardless of how these proposals are described, all embody the essence of a bailout: they absolve individuals of responsibility for their bad decisions--and force those who did nothing wrong to pay the price.

 

[Paulie]

Thought this was interesting
FT.com | Willem Buiter’s Maverecon | Time for comrade Paulson to pull the plug on the Fannie and Freddie charade

Excerpt:


What we have in the United States is not free-market capitalism, but socialism for the wealthy; government policies designed to privatize the profit, but socialize the loss.

What are you, new?

 

[JuniorCitizen]

This is the kind of things governments do which give socialism a bad name.

As though socialism hasn't enough inherent problems when its run on the up and up.

Yeah, listening to some youd think trying to make sure everyone shares in wealth is always an evil evil thing .......

 

[editec]

Yeah, listening to some youd think trying to make sure everyone shares in wealth is always an evil evil thing .......

Sharing the weath?

Grand idea.

You first.

 

[PubliusInfinitum]

Thought this was interesting
FT.com | Willem Buiter’s Maverecon | Time for comrade Paulson to pull the plug on the Fannie and Freddie charade

Excerpt:


What we have in the United States is not free-market capitalism, but socialism for the wealthy; government policies designed to privatize the profit, but socialize the loss.

You're confusion is a result of ignorance.

Since the very early 20th century the US has been operating under a mind set rendered by what were then known as "Progressives".

For all intents and purposes progressives are the seekers of the 3rd way... They are fascists in every sense of the word and deceipt is their stock in trade; but no more so than their socialist cousins.

Progresives/ moderates/ independent centrist believe that socialism is best operated under a capitalist facade wherein the viability of capitalism offsets the principle-less catastrophe stricken tenets of socialism.

The idea is to use the product of capitalism to fund the fatally flawed understanding of 'the social contract' and use the regulatory power of government to prevent the socialist parasite from consuming its capitalist host.

 

[Chris]

You're confusion is a result of ignorance.

Since the very early 20th century the US has been operating under a mind set rendered by what were then known as "Progressives".

For all intents and purposes progressives are the seekers of the 3rd way... They are fascists in every sense of the word and deceipt is their stock in trade; but no more so than their socialist cousins.

Progresives/ moderates/ independent centrist believe that socialism is best operated under a capitalist facade wherein the viability of capitalism offsets the principle-less catastrophe stricken tenets of socialism.

The idea is to use the product of capitalism to fund the fatally flawed understanding of 'the social contract' and use the regulatory power of government to prevent the socialist parasite from consuming its capitalist host.

No, the American government is owned by corporate lobbyists, not "socialists," and you are a tool of their propaganda machine.

You have bought into their bullshit hook, line, and sinker.

 

[editec]

The idea is to use the product of capitalism to fund the fatally flawed understanding of 'the social contract' and use the regulatory power of government to prevent the socialist parasite from consuming its capitalist host.

Capitalism is so dependent on the social contract it boggles my mind that you cannot understand that.

Where the social contract is breaking down, you find very few capitalistic activities happening.

The opposite of capitalism isn't communism or socialism, it's anarchy.

 

[BaronVonBigmeat]

No, the American government is owned by corporate lobbyists, not "socialists," and you are a tool of their propaganda machine.

You have bought into their bullshit hook, line, and sinker.

Do you think that big corporations want smaller government? I'm afraid that it's you who have fallen for the standard cliche, hook, line, and sinker.

 

[Chris]

Do you think that big corporations want smaller government? I'm afraid that it's you who have fallen for the standard cliche, hook, line, and sinker.

Oil & Gas: Long-Term Contribution Trends | OpenSecrets

 

[BaronVonBigmeat]

I'm not exactly sure what lesson I'm supposed to be drawing from your link. Oil and gas companies direct most of their funds towards republicans? Okay. That's understandable, since democrats are doggedly against letting oil companies drill offshore, or really just about anywhere in america quite honestly. And besides, republicans are not interested in smaller government, overall. They had 6 years where they dominated the government, and it grew faster than it did under the democrats.

Companies will sometimes want small government in their narrow little niche. And then for other sectors of the economy they want regulations, quotas, government-enforced cartels, tariffs, etc. That's what the republican party was all about after the civil war--using government power to help out powerful companies.

For example, the American Petroleum Institute (API) is a trade organization that sets the industry-wide standards for pipeline and drilling equipment. But it actually started out as a lobbying group which pushed for government-mandated production quotas, a means of protecting profits and shutting out new competition. Competition was driving down the price of gasoline and they wanted to put a stop to it.