The Obama Administration tried to bury some big news over Christmas weekend and most of the media missed it. Economist Alex Tabarrok at Marginal Revolution caught this story in the Christmas Day edition of the Washington Post:
The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.
...Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.
…By promising to keep the companies solvent, the government can maintain its sweeping power over the housing market. Fannie Mae and Freddie Mac have played a central role in Obama administration policies to keep mortgage interest rates low, restructure unaffordable mortgages, stop foreclosures and funnel money to housing programs around the country.
Earlier this month, Obama gave a stern talking to the big banks, demanding that they increase lending and curtail bonus payments. Apparently, they haven’t been following Obama’s script by boosting lending in gratitude for having bailouts forced on them. Fannie & Freddie's executives, however, they have been good little boys & girls and did exactly what they were told…so naturally, President Santa Claus rewarded them with the gift of bonuses and unlimited financial assistance from taxpayers.
It's worth remembering that just a few years ago, Fannie and Freddie CEO Franklin Raines promised: "It is private capital that is at risk, not the taxpayer's…. We do not receive a nickel of federal money."
Politicians lapped it up.
"I think Fannie and Freddie over the years have done an incredibly good job and are an intrinsic part of making Americans the best-housed people in the world." – Chuck Schumer, Senate Subcommittee on Banking Hearing, April 6, 2005
"These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis…. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." – Barney Frank, New York Times, September 11, 2003
Reminds me of things politicians say now. Like last week, when Obama called the Senate health care bill "the largest deficit reduction plan in over a decade."
Give me a break.