Bush made his speech this evening (see here).  He offered his version of an economic catastrophe.  He tried to justify his plan to buy up a bunch of mortgage securities that nobody but the government is willing to buy.   He suggested that if the government held these securities long enough it could turn a profit.  If that is the case, why doesn’t anyone else want to buy these securities.

The fact is that these securities are worth only whatever the value of their collateral might be.  The fastest way to get liquidity back into the financial markets is to take the lost.  Let Fannie Mae and Freddie Mac dispose of their assets for whatever they are worth.  That is, privatize the lending market.   

After this debacle, people will not want to invest money with a government sponsored agency.  However, they might be willing to invest money with investment houses regulated by the government.  So let’s get government out of the investment business and restore it to its proper regulatory role. 

Let’s bite the bullet.  Whether we like it or not, we have a catastrophe.  Like it or not, we built so many houses that the bottom has dropped out of the market.  There is no way to recover that value.  A bailout will just involve more people, the taxpayers, in Fannie Mae’s and Freddie Mac’s losses.  

We need to deal with the problem, not the symptom.  We need to get government out of the investment business.  We do not need to bail out the politicians who manufactured this mess.  We do not need to bail out their friends.  We have no good reason to trust these fools with more of our money.  It is too likely that they will just make matters worse.


  1. Sure, the lenders were following the rules. Fimian was talking about the “little guys” though, not the CEO’s and big-wigs whom he said should go to jail for this. Please don’t tell me I’m wrong about this! I’d hate to change my mind on Fimian 🙂

    “When the people in charge are crooked, theft becomes legal.” You got that right!

  2. kgotthardt – Fimian said the lenders were not at fault. They followed the rules. Except for quitting their businesses, they did not have much choice.

    The people who run the government sponsored lending agencies, however, do have some responsibility. And some of them left their jobs quit rich. Nonetheless, Congress made the rules they operated under as well.

    When the people in charge are crooked, theft becomes legal.

  3. kgotthardt — National class action suit? The problem is Congress, not the CEOs, and we elected Congress. Should we sue Congress? I expect they would actually like that. Whose money do you think the lawyers would use to pay off the lawyers?

  4. Here’s my plan: take all the criminals that did this, strip them of their personal assets and throw their physical assets in jail. That should give us some of our money back. Then we can talk about what else to do.

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