I studied a lot about international economic development in my college days. In fact, my M.S. degree focused on international agricultural development.
Just the word “nationalization” scares me.
In those days, third world countries would often nationalize a company for the “good of the people.” Usually, the real reasons were politics and money; to silence a political rival (the company management) and milk the company for personal and political cash.
Companies usually tanked following nationalization, becoming a drag on the economy instead of an engine of economic growth.
After nationalization, the company’s goals became political, not economic.
My worry is that our political geniuses in Washington D.C. will soon figure out that they now control a company that controls 44% (?) of the mortgages in the United States. The politicos could soon use that power to their political advantage, for example by stopping foreclosures by Fannie and Freddie on their constituents, or some other shenanigans.
I’m leaning tonight towards the idea that in the future we should not allow companies to become so big that they become “too big to fail.”
The sooner the government denationalizes Fannie and Freddie the better.
We saw how just being a “government sponsored entity” led evenually to private and political corruption.
I fear the speed and depth of corruption we could see with a government controlled Fannie and Freddie.
{ 2 comments… read them below or add one }
ks 09.19.08 at 2:15 am
Dear Comrades,
If you are scared now, just wait a few days. You should be absolutely terrified
The printing presses are on full speed. Treasury sales are going at an insane pace. Washington has decided to do a rush job on the biggest bailout ever. The SEC has suspended short sales on almost 800 financial firms. The markets are freaked out and oscillating crazy on every piece of news and rumor. The credit markets have seized up so bad that Bernanke has had to inject vast amounts of cash to keep the Fed funds rate pegged at 2%.
Yeah, this should end well.
God bless Amerika.
Rich 09.19.08 at 11:25 am
We have nationalized the mortgage industry with Fan & Fred.
We have [largely] nationalized the insurance industry with AIG.
Now it appears we are going to [partially] nationalize the entire finance industry with the bailout. Every financial institution with bad debt is going to lay it on the federal government (present & future tax payers) in exchange for a piece of the company.
I think the world would be shocked if something of this magnitude happened in China or Russia. It is incomprehensible that it is happening here.