Thanks for the previous post concerning my inquiry and your insight on Fannie and Freddie.
I was also thinking that this will further accelerate the housing price decline. Even if the government (aka the american taxpayer) bails them out (5 trillion). That will cause credit to further tighten and increase supply causing quicker and deeper housing price declines.

I agree with the idea of closing the overseas bases. Just keep the military happy by letting them invade Nova Scotia.

Seriously, though, I’m failing to see the downside in base closure. Keep Diego Garcia, maybe Keflavik. The savings would be enormous. The only downside is that we would have a bunch of unemployable illiterate testosterone-heads running around the 48 with their Saws, AR15s, or whatever.

The whole point is that the obfuscation arising out of the implicit guarantee is what’s financing the war. The moment America has to really answer the question about whether the Treasury is on the hook for the GSEs’ senior debt is the moment they have to face the serious possibility of the total collapse of their currency.

With that sword hanging over their heads, the Administration might just decide that it is a convenient time to cancel the tanker project, end the US military occupations of Japan and Germany, close most or all of their 700+ bases and stations outside the 48, and consolidate the country. The empire is gone, but few states at a time like this can come up with the necessary Atatürk or Gorbachev to orchestrate a smooth transition.

“This would help prevent a U.S. balance sheet debacle…” The WSJ has got to be kidding. The liabilities/loans are either backed by the U.S. Government (taxpayers) or they are not. Say the U.S. treasury receives subordinated (NB Why should it be subordinated? Last in, first out in my mind) debt. Where does the infusion money come from anyway? Just dismantle both of them and make the (difference in) liabilities general obligations of the government, or back the h*ll off. The problem doesn’t get solved through the layer of bureaucracy. This is just another example of trying to stretch the pain out over time instead of ripping the band-aid off now.

Igor sez Fannie and Freddie are “unneeded.” Indeed.

“The Price of Fannie Mae”, Editorial, Wall Street Journal, July 10, 2008.

Our own proposal, made months ago, is to require a more honest form of socialism by injecting taxpayer money now into both companies (say, in the form of subordinated debt or preferred stock) to recapitalize them enough to weather the current storm. This would help prevent a U.S. balance sheet debacle, and it would force the politicians to acknowledge the mess they have created. Then as the crisis passed, the taxpayers would at least get something for their money, while regulators could work to unwind Fan and Fred’s liabilities and shrink these monsters to a less dangerous size.

You know you’re having a bad day when the neo-con dominated WSJ editorial board starts advocating socialism

After hearing that news, Igor says “UGLY.”

Seriously, Bernanke and Paulson know the economy is just a matter of confidence, and confidence in the servce-based economy is about gone. Nouriel Roubini yesterday on CNBC talked again about how the impact on the real economy hasn’t even begun to be felt.

I’m not a disciple either, but I thought Paul was making more sense this morning than anyone else.

I found it kind of creepy how Paulson and Bernanke keep pushing for more power to fix things, but they seem to be short on details on how they plan to do this.

As I was saying to L, things fell apart while these clowns were in charge. We are supposed to believe that if they are given more power, it will be less of a circus?

Separately, I watched Ron Paul with Paulson this morning. Maybe RP should be President (disclaimer – I am not an RP disciple). I feel bad for Hank, having to jawbone this administration’s policies. (Once again: Kevin Bacon in Animal House, “Remain calm! All is well!”)

Anybody think there’s not another leg down in housing prices?

While leading the St. Louis Fed, Poole roiled markets in 2003 when he said the government should consider severing its implied backing of Fannie Mae and Freddie Mac and said the companies lack the capital to weather financial market disruptions. In 2006 and 2007 he called for lawmakers to strip Fannie Mae and Freddie Mac of their charters.

Sounds like that was pretty good advice.

My people have been in this game for 25 years . . . They are losing their jobs — these firms are going out business

Lovely Couldn’t have happened to a nicer bunch of people.

I’m listening to Frank now (he says the “overflow room” is in use — no kidding)

Frank Committee hearing (streaming link at this site) just opened up. Whoa Nelly!