Suspension of Disbelief
John McCain says that he is suspending his campaign to help negotiate a bailout of American financial institutions.
McCain is not on the Senate Banking Committee, the members of which one might expect would be doing the heavy lifting in the Senate.
Moreover, in September 1944, when Nazi troops were desperately attacking Allied positions in the Battle of the Bulge, Franklin Roosevelt managed not to suspend his campaign, even though his administration was fighting the biggest threat ever to democratic forms of government.
Good luck with convincing anyone that the suspension is somehow necessary, Senator.
Labels: 1944 election, 2008 election, John McCain, presidential campaign, suspension
Inside the Mind of Sarah Palin: 2000 Edition
By now, most Americans know (whether they want to or not) that as Governor of Alaska, Sarah Palin tried to get Mike Wooten fired from his position on the Alaska State Police. He and her sister had gone through a nasty divorce, so her dislike of him was hardly surprising.
But what is surprising is her letter of recommendation that she wrote while still Mayor of Wasilla, Alaska. Do note that she fails to omit words to the effect of "he's dating my sister." Now, those are small-town Republican values that John McCain can believe in. (The nepotism part, not the divorcing part, although he believes in divorce as well.)
Labels: letter of recommendation, Mike Wooten, nepotism, Sarah Palin
The Joys of the Ownership Society
Now it seems that the 40-year American experiment of having government-sponsored enterprises swim in the waters of the stock markets is over, at least for now. (Fannie Mae was an arm of the federal government from 1938 until 1968, when the Johnson administration privatized it to get its debt off the government's books; Freddie Mac was formed in 1970 in essentially its current form.)
The impetus for an administration so proud of the free market and so enamored of small government to effectively privatize the two mortgage giants? It had little choice.
The government's planned takeover of Fannie Mae and Freddie Mac, expected to be announced as early as this weekend, came together hurriedly after advisers poring over the companies' books for the Treasury Department concluded that Freddie's accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.
The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies' debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.
The details of the deal have not fully emerged, but it appears that investors who own the companies' common stock will be virtually wiped out; preferred shareholders, who have priority over other shareholders, may also wind up with little. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.
But what were company officials saying about the situation at Freddie and Fannie? Barron's has an answer: in its issue out on newsstands today, a letter in the Mailbag section from Anthony Piszel, the Executive Vice President and Chief Financial Officer of Freddie Mac, tells a very different story:
To the Editor: The arguments made in "The Endgame Nears for Fannie and Freddie" (Cover Story, Aug. 18) miss the mark.
All financial institutions in the mortgage business are taking losses. Freddie Mac is no exception. But Freddie Mac is weathering the storm better than many. The default and credit charge-off rates on mortgages we own are a fraction of industry averages. We hold capital well in excess of regulatory requirements. Our liquidity position remains strong, and we have reported strong revenue growth in our mortgage-investment and guarantee businesses.
I hate to be a spoilsport, but Barron's was right to mention the word endgame. And if you were an investor who took Freddie Mac or Fannie Mae officials at their word that the companies were well and truly strong, welcome to the real world of finance, where it is hard to tell the difference between an outright lie and rampant self-delusion.
Labels: Fannie Mae, Freddie Mac, stock market, stupid mailbag tricks