Home
In this issue
June 17, 2013

Rabbi Simcha Weinstein: Black to the Future: American Apparel Gets Biblical

Patrik Jonsson: Minnesota Nazi: How did Nazi hunters miss Michael Karkoc?

Kate Irby, Ali Watkins, Trevor Graff and Kevin Thibodeaux: All the ways you're being watched
Don Lee: G-8 meeting will test NSA leaks' effect on U.S. influence

Patrik Jonsson: Fort Hood shooting: Judge nixes Nidal Hasan defense strategy. What now?

Stacey Burling: Why the stigma for migraine sufferers?

The Kosher Gourmet by Lisa Abraham: Does it work? 5 new kitchen gadgets put to the test

June 14, 2013

Rabbi Abraham J. Twerski: A spiritual budget: Religious economics and being a ruler

John P. Martin: Hitler insider's missing diary found

Matt Pearce: NSA surveillance disclosure could affect court cases
Peter Tinti: US bounties changes strategy on (Wild, Wild) West African jihadis

Daniel Pendrick, M.D.: Memory loss? Old age may be the least of it

Lauren F. Friedman: But it's all natural! Should we have an instinctive preference for herbal remedies?

Jewz in the Newz by Nate Bloom : Streisand and Alicia Keys in Israel; "Girls" Stuff; Mel Brooks, Another TV special; Superman (who is Jewish) returns --- Israeli plays his mom

The Kosher Gourmet by Sharon K. Ghag : Bored with salad? Bling it up a bit (4 effortless recipes that will result in a 'WOW!')

June 12, 2013

Stephanie Hanes: Little girls or little women? The Disney princess effect

Fred Weir: In tweak to US, Russia would 'consider' asylum for Snowden

Sharon Palmer, R.D.: What's so special about Omega-3 supplements?
Morgan Housel: What newspapers were saying when you should have been buying

Pete Spotts: How cockroaches evolved so as to bypass 'roach motels'

The Kosher Gourmet by Anjali Prasertong: Deep-dish cookie: Warm, gooey and a little over the top

June 10, 2013

Joseph A. Slobodzian: Faith healing and third degree murder: Thorny legal case
Lindsay Wise: Few options for online users to avoid spying, experts say

Sharon Palmer, R.D.: There are plenty of nutritional food bargains out there
Harvard Health Letters: Can bariatric surgery control diabetes?

Zach Murdock: Superglue helps doctors save infant's life

The Kosher Gourmet by Celebrated chef Mario Batali : As good as grilling gets: Rib eye with dry mushroom spice rub

June 7, 2013

Rabbi David Aaron: Beating jealousy

Caroline B. Glick: Wounded . . . and dangerous

Clifford D. May: Al Qaeda vs. Hezbollah
Harvard Health Letters: Fighting back against allergy season

Kimberly Lankford: Grandparents who use FSA to cover grandkid's braces and other must-know info

Jewz in the Newz by Nate Bloom:J ewish Tony Nominees/Tony Awards; Jewish Teen Actor In Sci-Fi Flick; Jewish singer in "Voice" finals

The Kosher Gourmet by Anjali Prasertong: A tart filling so good it might not make it to the crust

June 5, 2013

John Rosemond: Mom, Dad: Talk More and listen less

Kristen Chick: Egypt court sentences 43 pro-democracy workers to prison

Sharon Palmer, R.D.: Mushrooms Have Medicinal As Well As Culinary Value
Morgan Housel: Why you never learn from your investment mistakes

Don Lee: In China, kindergarten rivalry takes deadly turn

The Kosher Gourmet by Sara Kate Gillingham-Ryan: 30-Minute Coq au Vin isn't a dream

June 3, 2013

Molly Hennessy-Fiske: Military judge to consider letting Fort Hood shooting defendant represent himself

Richard A. Serrano: Pvt. Bradley Manning's WikiLeaks trial also a test for government

Mark Trumbull: Have degree, driving cab: Nearly half of college grads are overqualified
Kim Lankford: What to do when long-term care insurance premiums rise

Deborah Netburn: Study: Adults' mouth bacteria may help babies

Jewz in the Newz by Nate Bloom: Jewish Contestant on 'The Voice'; Will Smith's 'Jewish movie family'; Bravo Gives Long Island Jews the Jersey Shore Treatment; Magicians and More

The Kosher Gourmet by Bill Ward: How to be as refined as the wines at a wine tasting

May 29, 2013

Andrew Connelly and Helene Bienvenu: The Little Synagogue that Refused to Die

Dennis Prager: The 'Muslims-Killed-by-the-West' Lie

David Clark Scott: Open war on teachers?
Morgan Housel: If you know only five things about investing, make it these

Sara Reardon: AGenome detectives change the donation game

Deborah Netburn: A one-way ticket to Mars? 78,000-plus and counting apply by video

The Kosher Gourmet by Bev Bennett: CHEDDAR AND CHERRY MUFFINS --- your mouth is already watering

May 24, 2013

Rabbi Tzvi Hersh Weinreb: When I didn't so 'humbly disagree'

Caroline B. Glick: Thank you, Hafez al-Assad

Diana West: From the Brooklyn Bridge to London
Morgan Housel: Why spotting bubbles is so much harder than you think

Environmental Nutrition editors: NuVal labeling to the rescue?

Jewz in the Newz by Nate Bloom : Memorial Day: Jews Serving and KIA in War on Terror; Liberace Bio-Pic; Jew Wins "Survivor"; Shalom, Dr. Brothers; More

The Kosher Gourmet by Emma Christensen: HIDE THESE FROZEN TREATS FROM THE KIDDIES!: Sangria pops; Irish cream pudding pops; mango Lassi pops

May 22, 2013

John Thorne: They launched the 'Arab Spring' but now yearn for the good old days of a strongman

John Rosemond: 'Disciplinary math' adds up to parental successl

Warren Richey: Are prayers before public meetings OK? Supreme Court to decide
Rick Montgomery: Use of ADHD drugs as study aid raises concern on campuses

Brierley Wright, M.S., R.D.: 6 convincing reasons you should keep carbs in your diet

Eoin O'Carroll: Scientists examine nothing, find something

The Kosher Gourmet by Carole Kotkin: This soup is made from one of the great pleasures of spring: A wonderful pairing of rosy color and earthy tang

May 20, 2013

Richard A. Serrano: Is Meir Kahane's assassin now a changed man?

Hannan Adely: Town raises Palestinian flag at City Hall

Melissa Healy: Genetic copies of living people from embryos no longer science fiction
Morgan Housel: When smart investors do stupid things

Sharon Saloman, M.S., R.D.: Hunger games: Eat more, weigh less, without starving

Jewz in the Newz by Nate Bloom : Jews Inducted into Rock Hall of Fame; Anton Yelchin co-stars in New "Trek" film; Kutcher (but not Kunis) visits Israel; Jewish TV Star Praises Jewish Rap Star

The Kosher Gourmet by Cathy Pollak: WARNING: This WALNUT CAKE WITH PRALINE FROSTING, perfect for afternoon coffee, is addicting


Jewish World Review Sept. 10, 2008 / 10 Elul 5768

Paulson didn't bailout Fannie and Freddie --- the power grab was thievery, Mafioso style

By Robert Robb

Printer Friendly Version
Email this article

http://www.JewishWorldReview.com | Less than two months ago, Treasury Secretary Hank Paulson told Congress and the country that if he were given virtually unlimited power to intervene in the affairs of Fannie Mae and Freddie Mac he wouldn't have to use it.


"If you have a bazooka in your pocket and people know it, you probably won't have to use it," was the inartful way he put it.


Well, Paulson was massively wrong, and remarkably quickly so. Worse, the powers that Paulson successfully sought, rather than calming markets, alarmed them further.


Fannie and Freddie do not originate mortgages. Instead, they buy mortgages, bundle them into securities, guarantee their performance and sell them to investors. This frees up funds from the mortgage originators to continue lending. They also hold some of the mortgages they bundle and buy mortgage-backed securities from others for investment.


Fannie and Freddie have to raise capital to buy mortgages. The threat of federal intervention severely hampered their ability to do so. If there were a federal intervention, no one knew what would happen to existing shareholders and debt holders.


The seizure of the two companies orchestrated by Paulson over the weekend wasn't a bailout. The management of Fannie and Freddie were still trying to make things work despite the added burden of the uncertainty created by the bazooka in Paulson's pocket.


Paulson concluded that they weren't going to make it. He decided that the federal government was going to take them over.


So, the federal government put the companies into conservatorship. It also awarded itself, for both Fannie and Freddie, a billion dollars in equity with a guaranteed rate of return of 10 percent and the right to purchase, at terms it sets, up to about 80 percent of the company.


This wasn't even a takeover. It was thievery, Mafioso style.


In the modern world of global finance, Fannie and Freddie should not exist. They are anachronisms. And they may not have made it.


But they deserved the chance to try, rather than being given a choice they could not refuse by Godfather Paulson: accept conservatorship and preserve some position for your shareholders or be involuntarily taken over with shareholder equity being perhaps totally extinguished.


Paulson has asserted and seized a remarkable degree of authority over private economic activity. He also forced the fire sale of Bear Sterns to J.P. Morgan Chase. He even dictated the price of the transaction.


In the process, he has put taxpayers at risk for hundreds of billions of dollars in mortgage financing. Fed chairman Ben Bernanke has willingly allowed Paulson to use the Federal Reserve as a piggy bank for his power grabs. As a result, half of the Fed's assets now consistent of junk other investors are shunning.


This is all supposedly to prevent systemic financial risk. This is the theory that if one big boy fails, all the big boys will fail.


In Fannie and Freddie's case, the consequences of their failure and their indispensability to mortgage finance are both exaggerated.


The mortgage-backed securities Fannie and Freddie guarantee are mostly held by others. The underwriting on the underlying mortgages was pretty sound.


The delinquency rate on them is just around 2 percent.


So, if the guarantees became doubtful, the market value of the securities would decline, but not by much.


And there are other ways of creating a secondary market in mortgages. In fact, the existence of Fannie and Freddie, with their substantial competitive advantage from a perceived (now explicit) governmental guarantee, hampered the development in this country of the covered bond approach that predominates in Europe.


With covered bonds, the mortgage originator keeps the mortgage. The originator then issues its own bonds backed by its mortgages, replenishing its capital to keep lending. But because the originator is on the hook for any defaults on the underlying mortgages, underwriting tends to be tighter. Paulson, in addition to riding roughshod over the private economy, is really trying to continue pumping money into housing when the market is screaming, about as loudly as it can, that there's been an overinvestment in housing.


President Bush's previous treasury secretaries — Paul O'Neill and John Snow — were thought to be mostly ineffectual. The country didn't know how well it had it when Bush's treasury secretaries were merely ineffectual, rather than perniciously effective.

Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Robert Robb is a columnist for The Arizona Republic. Comment by clicking here.

Robert Robb Archives

© 2008, The Arizona Republic

Insight (Our Columnists)

 Arnold Ahlert
 Mitch Albom
 Jay Ambrose
 Michael Barone
 Barrywood
 Lori Borgman
 Stratfor Briefing
 Mona Charen
 Linda Chavez
 Richard Z. Chesnoff
 Ann Coulter
 Greg Crosby
 Larry Elder
 Suzanne Fields
 Christine Flowers
 Peter Funt
 Frank J. Gaffney
 Bernie Goldberg
 Jonah Goldberg
 Julia Gorin
 Jonathan Gurwitz
 Paul Greenberg
 Argus Hamilton
 Victor Davis Hanson
 Betsy Hart
 Ron Hart
 Nat Hentoff
 A. Barton Hinkle
 Jeff Jacoby
 Paul Johnson
 John Kass
 Jack Kelly
 Ch. Krauthammer
 David Limbaugh
 Kathryn Lopez
 Rich Lowry
 Michelle Malkin
 Jackie Mason
 Ann McFeatters
 Dale McFeatters
 Dana Milbank
 Jeanne Moos
 Dick Morris
 Jim Mullen
 Deroy Murdock
 Judge A. Napolitano
 Bill O'Reilly
 Clarence Page
 Kathleen Parker
 Star Parker
 Dennis Prager
 Wesley Pruden
 Tom Purcell
 Sharon Randall
 Michael Reagan
 Robert Robb
 Cokie & Steve Roberts
 Heather Robinson
 Debra J. Saunders
 Martin Schram
 Greg Schwem
 Culture Shlock
 David Shribman
 Roger Simon
 Lenore Skenazy
 Michael Smerconish
 Thomas Sowell
 Mark Steyn
 John Stossel
 Cal Thomas
 Dan Thomasson
 Bob Tyrrell
 Diana West
 Dave Weinbaum
 George Will
 Walter Williams
 Byron York
 Cathy Young
 Mort Zuckerman

'Toons
 Eric Allie
 Robert Arial
 Chuck Asay
 Baloo
 Nate Beeler
 Lisa Benson
 Chip Bok
 Dry Bones
 John Branch
 Daryl Cagle
 Patrick Chappatte
 John Cole
 Paul Combs
 J. D. Crowe
 John Darkow
 Bill Day
 John Deering
 Sean Delonas
 Brian Duffy
 Everything's Relative
 Randall Enos
 Mallard Fillmore
 David Fitzsimmons
 Glenn Foden
 Jake Fuller
 Bob Gorrel
 Walt Handelsman
 Joe Heller
 David Hitch
 Jerry Holbert
 David Horsey
 Lee Judge
 Steve Kelley
 Mike Keefe
 Jeff Koterba
 Dick Locher
 Chan Lowe
 Jimmy Margulies
 Gary McCoy
 Rick McKee
 Jack Ohman
 Jeff Parker
 Milt Priggee
 Michael Ramirez
 Rob Rogers
 Steve Sack
 Bill Schorr
 Drew Sheneman
 Kevin Siers
 David Ray Skinner
 Jeff Stahler
 Scott Stantis
 Danna Summers
 Gary Varvel
 Kirk Walters
 Christopher Weyant
 
Larry Wright
 Dan Wasserman
 Adam Zyglis

Lifestyles
 Tech Q&A
 Mr. Know-It-All
 Ask Doctor K
 Richard Lederer
 Frugal Living
 On Nutrition
 Bookmark These
 Bruce Williams