Thursday, August 21, 2008

Garrett: Bring the Pain

In a good interview with Representative Scott Garrett on Fox Business this afternoon he was once again discussing the likely bailout of Fannie Mae and Freddie Mac.

As you may remember, about a month ago Garrett was rewarded for his consistent call to reign in the GSEs by becoming a media darling and extreme dark horse in the Republican Veepstakes (I had to).

So, it makes sense that Garrett was back talking about the companies' latest woes. While the host kept arguing that failure by Fannie and Freddie would cause a lot of pain, Garrett clearly articulated the fact that with an issue like this there is going to be pain and that it's part of the process. I think it's fair to say Garrett would rather have a shock to the system as opposed to a prolonged Chinese water torture.

What I really would have liked to have heard them talk about is short selling and how it's turning the collapse of Fannie and Freddie into a self-fulfilling taxpayer soaking prophesy.

If we take Fannie for example, which is faring better of the two, they have lost nearly 45% of their value since the order against short selling expired seven days ago. Granted, it's not all that great, but the company had dropped 41% over the 16 days the ban was in place.

We heard all of Congress, the President, and every talking head say that Fannie and Freddie are too big to fail. They go down, it wrecks the economy. We bail them out, we're potentially on the hook for trillions of dollars, and it wrecks the economy.

Forcing them to fail, however, is not exactly what people had in mind when talking of the consequences or having Congress put taxpayers on the hook. However, that seems to be exactly what's going on.
Hedge-fund manager Doug Kass, who has placed big bets that Fannie Mae shares will fall, said on Wednesday that the depressed stock of the two companies will drop to zero, dismissing Mudd's comments about its capital adequacy.
Yeah, and he probably will make a killing on this road to national ruin.

These are the guys that are speeding up the decline of Fannie and Freddie in order to make a quick buck before the bailout hits the fan. They don't care how many people they're screwing over in the process, as long as they get theirs. These are also the guys the Republicans, including Garrett, decided to protect against paying their fair share in taxes so we could start to get rid of the AMT.

If we've learned one thing over the last few years, in addition to the fact that nations like our friends in Russia own a lot of our debt, there is no economic patriotism anymore.

And the greed goes on...