Fannie Mae and Freddie Mac and the Full Faith and Credit of the USA

Robert Romano posted an interesting article on the debt of Fannie Mae and Freddie Mac and the U.S. debt on 7 April 2010.  Romano is the Senior Editor of the ALG News Bureau.  ALG is Americans for Limited Government, which is an organization doing good work for the cause of American liberty.  I will summarize the most interesting points in his article below.

Congress placed the government secured entities (GSEs) Fannie Mae and Freddie Mac under federal government conservatorship in 2008 because they were effectively bankrupt.  Congress formed the Federal Housing Finance Agency to manage their sorry financial mess, which Congress had long worked hard to foster.  In June 2008, their combined debt was $6.6 trillion, of which $4.7 trillion was mortgage-backed securities.  Congressman Scott Garrett asked Treasury Secretary Timothy Geithner why this debt taken on by the federal government had not been added to the national debt.  The U.S. debt of $12.6 trillion should really be $19.2 trillion and this would result in the downgrading of U.S. debt due to excessive risk.  There is quite a song and dance going on here while trying to avoid this.

Geithner says this corporate debt is not the same as U.S. Treasuries and should not be considered sovereign debt.  He says, "By statute, all obligations and securities issued by GSEs must include a statement that makes clear that such obligations and securities are not guaranteed by the United States and do not constitute a debt or obligation of the United States."  But, he also says the "Treasury is committed to supporting the GSEs while in conservatorship and to ensuring that the GSEs have sufficient capital to meet their debt obligations and honor their guarantees."  When Fannie Mae and Freddy Mac were nationalized, the FHFA director James Lockhart told Congress that "the conservatorship and the access to credit from the U. S. Treasury provide an explicit guarantee to existing and future debt holders of Fanny Mae and Freddy Mac."  It seems clear that when Congress nationalized the GSEs, the earlier statute that their obligations were not guaranteed by the federal government, had to be superseded or inherently contradicted.

Foreign investors held $1.5 trillion of the $4.7 trillion in mortgage-backed securities.  In June 2007, the last an accounting by nation was performed, China held $376 billion, Japan $228 billion, Russia $75 billion, Luxembourg held $39 billion, Belgium $33 billion, Britain $28 billion, and Middle Eastern national funds are also big holders.  Many of these nations apparently said they would not buy Treasury bonds to support the U.S. national debt if the government did not rescue them from the bankrupt mortgage-backed securities they held.  The federal government has since bought up $1.25 trillion of mortgage-backed toxic security debt.  The Treasury will not say whose toxic securities they bought, but they only dealt with primary dealers who could directly deal with the Federal Reserve Bank of New York.  When the TARP program was put together, the Treasury was forbidden to purchase the mortgage-backed securities of foreign central banks.  But, it appears likely that Geithner has done just that with paper which is indeed backed by the explicit backing of the United States.  What else could he have paid the primary dealers for the toxic securities with?

This is just me again:  Our real national debt is clearly much greater than the $12.6 trillion figure we are told in a huge lie that it is.  There is still much more hidden debt than just that of Fanny Mae and Freddy Mac also.

Obama hides true costs of carbon cap and trade

The Competitive Enterprise Institute used the Freedom of Information Act to force the Treasury Department to release a number of memos about the real costs of carbon cap and trade legislation.  It proved difficult to get the Obama administration to give up these memos and reports and they were heavily censored.  Censoring of Defense Department documents I understand, but censoring Treasury Department documents is generally much less understandable.  It must be an elitist thing.  Those dumb taxpayer dolts have no need to know and they would not understand anyway.

Gary Jason gives a rundown on what was found and summarizes some previous estimates of the effect of carbon cap and trade on jobs and costs here.  He points out that the CRA think tank estimated that carbon cap-and-trade will cause the loss of 3.2 million jobs in America over 15 years.  The Obama Energy Department says that the cap-and-trade bill will increase electricity costs by 20% over 20 years.  I think this a terrible underestimate, but Obama did not want this out anyway.

The CEI released memos of the Treasury Department revealed that:

• Judson Jaffe of the Office of Environment and Energy estimated the new taxes of the Obama plan will be between $100 and $200 billion a year, which is higher than Obama publicly estimated them to be.  The upper end tax cost is an increase of $1761 per family.
  
• An Obama transition memo said that the Obama environmental plan will double the cost to the economy of environmental regulations.
• One memo thought the carbon cap-and-trade cost would be $300 billion a year.
• A memo said the Obama environmental policies will cost as much as corporate income taxes.
• A memo says cap-and-trade will ruin energy-intensive industries, such as manufacturing.
  

Richard Rahn - Feel like a chump?

Richard Rahn, a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth wrote a hard-hitting commentary in the Washington Times on 22 January 2009 about Federal taxes in this time of huge government bailouts for favored industries, local governments, and other Democrat causes. He asks if we "feel like a Chump?" We should be feeling very much like chumps as these politicians laugh at our gullibility.

He points out that when Congress wants to spend $825 billion on a so-called "stimulus program," which many economists are rightly pointing out is actually a de-stimulus program, Congress and the new administration have some very interesting views on taxation. Among these are:

• Chairman Charles Rangel of the House Ways and Means Committee, which writes tax legislation, did not pay taxes on some of his income, such as rent from Caribbean property.
• Senate Majority Leader Harry Reid has repeated said that paying taxes is "voluntary."
• Tim Geithner, the new Treasury Secretary under Obama, failed to pay income taxes for many years, when he worked for the IMF. He then served as the president of the Federal Reserve Bank of New York while still owing those taxes. [Can you imagine the tax penalties most of us would be assessed over those years if we had not paid taxes we owed?] [Wikipedia presently says he "served as the president of the Federal Reserve Bank of New York and was a small-time tax chiseler."] He now controls the IRS.
• Many Congressional and media defenders of Geithner and Rangel correctly argue that the tax law is complex and some laws are vague and unclear. Rahn notes that, like everyone else, he does not understand how to obey the 65,000 page Internal Revenue Code. So if the well-connected politically do not have to pay their taxes, shouldn't the rest of us be treated equally under the law as required in the Constitution?
• He thinks all Americans should pay the same tax rate and remembers that when Sen. John Kerry ran for president in 2004, his billionaire wife paid a lower tax rate than most Americans did.
• The typical American family of four is paying $132 to subsidize Goldman Sachs and already committed to paying $662 to Citibank, even before Treasury guaranteed $300 billion of additional debt for Citibank.
• The Obama "stimulus" program of an additional $825 billion will cost the American family another $20,000 in taxes and/or losses to inflation.

He concludes, 'Just remember, those members of Congress who vote to tax you and spend your money on "bailouts" and phony "stimulus" may be calling you a "chump" behind your back.'