wisdevil,
As soon as 6% of the subprimes started detonating, Treasury Secretary Henry Paulson went into crash-alert mode and began looking for a place where his buddies could offload their dodgy assets. As the article suggests, Paulson finally decided that Fannie and Freddie were the only practical option.
And that's just one of many stealth bailouts.
There are others, too. Like Bernanke's quantitative easing (QE) shell game. QE was promoted as a way to increase consumer lending by building reserves at the banks. Only it doesn't work that way. What QE really does is exchange bank reserves for "unsellable" mortgage-backed securities. In other words, it trades quality, liquid bonds for illiquid assets of uncertain value. The arrangement allows the banks to earn interest on reserves at no cost to themselves, while the Fed is saddled with downgraded securities for which there is no current market. If you are the Fed; you just got taken to the cleaners.
Bernanke implemented the "good bank/bad bank" model that was recommended after the Lehman default, but without any strings attached for the banks. Since then, it's been one ginormous government-paid freebie after another. Rather than nationalize the banks so they could be cleaned up, reorganized and recapitalized. Bernanke found a way to rebuild balance sheets, restore profitability, and preserve the banks political firepower without any fundamental structural change. None of the head honchos at Morgan Stanley, Goldman Sachs, Citigroup or JP Morgan lost their jobs. The same wobbly, crisis-prone system has been reassembled without the slightest change to the blueprint
The bailouts merely indicate the extent to which the banks control all parts of the political apparatus. The problem is political not economic. Speculators will always try to bend the rules and game the system. But it's the public's responsibility to make sure their representatives keep a tight leash on the high-stakes gamblers and other flim-flammers. That means tough, hardnose regulations; a new regime of stop signs, speed limits and guard rails. Cross the meridian, and it's "off to the poky". Presently, the rules only apply to those who are not powerful or well-connected enough to shrug them off, which is why the system is broken.
The public is being fucked by fraudsters that control our Government. It all started under Shrub, when Greenspan used the Real Estat bubble to support Shrub's re-election.
Wall Street picked Obama, as the best cover to continue business as usual. So far Obama has been able to do things for them the Rethuglicans and Shrub could never have pulled off. But the root blame lies in flawed free market libertarian thinking promoted by Friedman, Reagan, Thatcher, Rubin, Greenspan and their co-conspirators as much as Shrub.
Wall street is a den of thieves. Ultimately, no one except our Government will ever have enough power to curb Wall Street's excesses. That will never happen until things get so bad that we throw all the bums out. Meanwhile thieves and their puppets continue to confuse the public and steal.
