Bush signed into law an enormously costly mortgage bailout today, turning a deaf ear to financial experts who warned about the bill’s dangers and risks, and choosing instead to spend untold billions of dollars (potentially up to $300 billion) to bail out government-backed mortgage giants Fannie Mae and Freddie Mac.
“David M. Walker, the former comptroller general of the United States and head of the Government Accountability Office . . . said that Mr. Bush might have been unwise to sign the measure. ‘Providing authority to the secretary of the Treasury to extend credit or to buy stock is one that will end up costing the taxpayers tens of billions of dollars.’ Mr. Walker noted that other government interventions in the private market, including a rescue of the Chrysler automobile company had provided an opportunity for taxpayers to profit. But when it comes to the mortgage giants, he said, there is no upside. ‘The way this is structured,’ he said. ‘It’s only a matter of how much the taxpayers are going to lose.'”
In signing the bill, Bush knuckled under to Congressional leaders like Barney Frank, Charles Schumer, and Chris Dodd, who used the bill to fund left-wing special interest groups that support them, and to further enrich the unaccountable government-backed mortgage giant Fannie Mae, which has long been run by liberal power-brokers, and which used massive accounting fraud to inflate its managers’ bonuses, even while helping spawn the mortgage crisis.
In the Wall Street Journal, Holman Jenkins describes how much of the mortgage crisis remains hidden, despite its enormous scale, in places like California. In the Washington Post, Robert Samuelson describes how the government’s “affordable housing” fetish contributed to the mortgage meltdown, and worries (as I have) that the mortgage bailout, by rewarding irresponsible lenders and borrowers, will encourage irresponsible behavior that may lead to recurring financial crises in the future. (Regulatory pressure on banks to promote “affordable housing” and “diversity” helped spawn the mortgage crisis).
Here’s an infuriating example of bias towards irresponsible people in press coverage of the mortgage crisis.