The phrase government sponsored enterprises (GSEs) is a circumlocution for government running the private sector. In return, those in the government whose political predilection is to do so are paid by those facades of private enterprises to get reelected. And this is all being done in the name of creating a Great Society. The United States has GSEs for housing and student loans and if the country lets the Democrats get away with finishing the LBJ agenda, there will be one for every sector of the economy, co-existing with the private sector. America could be on its way to becoming one giant GSE.
The housing crisis, as documented literally in multimedia over the last 15 years, has its roots in the overzealousness of the Congressional and Clinton Democrats to expand homeownership by shifting the capacity to pay for those homes abroad to China and Mexico. That addiction continues only for more Mexicans to cross the U.S border illegally and for Chinese to revamp their country, creating jobs for Chinese with American money, to look ravishingly new in time for the Shanghai World Expo 2010 with the latest energy efficient technologies, two years after the Beijing Olympics in 2008, even as the Congress and the administration are experiencing grave lethargy to pass domestic energy reform to keep those jobs in the country and to pay for universal health care that just became the law of the land.
The United States is living the life of a surrogate, rejoicing in China’s growth with the American expo 2010 being the political circus of the progressive dilapidation of urban and rural America, including New York City whose streets stink of stale food and are dotted with pot holes even as its denizens experience luxury indoors, similar to third world countries. The future of New York, New York seems to be Bombay, India, not the other way around. American public policy seems to be to redistribute the alms from its rich through taxation to keep the rest on social subsistence. It is Third Way laissez-faire and Harlem economics.
Secretary of the Treasury Timothy Geithner has a knack for receiving tongue lashings for his bosses and living to tell the tale. He is the boy face go-between between the partisans in his party and the people, having apprenticed under Bill Clinton, the most partisan Democrat president this country has seen in recent memory. Geithner would be better off in Hollywood playing an angry young man in rhetoric while really being one of the King’s men. However, that gig may not last too long to pay his bills. He must move on to playing more authentic politics if American authenticity is to last long enough.
The Secretary has testified on the matter of GSE reform, against the backdrop of the Democrat success on health care reform, in the very Clintonesque mold of speaking from both sides of his mouth that fundamental change is necessary but that effectively entails leaving them alone to subsidize housing demand. He appears to be his President’s salesman to legislate principle without sacrificing the Great Society ideal of the steady progression to a government sponsored (United States of) America akin to the General Services Administration.
It is in this President’s best interest to try not to save FDR, LBJ and WJC (William Jefferson Clinton). He must save BHO (Barack Hussein Obama) to uphold his constitutional oath as President. And for that he must get the GSE debt shadow off the books of the Treasury which, if it comes due, along with his health care-de facto-GSE, can enlarge the national debt to twice the national output: every American would be living in a Great Society owing twice his or her annual income for that way of life. And if it is all paid by the Federal Reserve in a time crunch 20 years down the road, inflation would be pre-Volckeresque and two dollars will be needed to buy one yuan only if Wall Street learns to eat dumplings and speak Chinese.
Congressman Barney Frank, a Democrat from Massachusetts, is correct that the GSEs must be abolished and the government must focus on subsidizing low-income housing and other forms of housing through tax policy. All the GSEs must be fully privatized and given a Financial Holding Company (FHC) or Bank Holding Company (BHC) status for supervision by the Fed with full access to all of the Fed’s lending facilities.