Fannie Mae, Freddie Mac and the free fall of the U.S. economy
Critics in Congress who voted against the bill voiced concern that we were rewarding Wall Street's greed. They argued that we, as a nation, were rewarding predatory lending practices. They argued that we were rewarding massive fraud. They specifically argued that the housing bill bails out the banks and broker-dealers that are joined at the hip with Fannie Mae and Freddie Mac through the trillions and trillions of dollars of those bogus insurance policies against default called credit-default swaps.
During the week I spent in Washington reporting this story, I have concluded that we are a nation of disinterested and mostly happy bystanders. Polling data tells us this much: As long as our paychecks clear every two weeks, we are happy. As long as our beer is cold, we are happy. As long as we have a warm puppy to hold, we are happy. As long as we can fill up our Chevy Mastodons, we are happy. As long as we have HBO and Showtime, we are happy. As long as we are not foreclosed upon and homeless, we are happy
A 10.615 trillion national debt is more than we want to think about. Fannie Mae and Freddie Mac are also more than we want to think about. We like to think of the United States as a participatory democracy It is-but only in theory. Participatory democracy is for the disgruntled and for kooks.
With a debt ceiling of 10.615 trillion, our children, and our children's children, will be paying the price. And this is evil. We have mortgaged their futures.
I am deeply ashamed of my generation's apathy and willful ignorance. Here and now, I apologize to my children and any future grandchildren for blowing it.
It's too late to get out of the bailout business. Too late. The stock and bond markets sank. Treasury securities sank. The dollar sank. The national economy sank. The world economy sank.
In my generation, everything sank.
We may be a nation of the stupidly happy, but at this time in our history I am reminded of Pablo Neruda's "Song of Despair": "You swallowed everything, like distance. / Like the sea, like time. In you, everything sank."
Peter Spencer, of Ernst & Young and a former top British Treasury official agreed. "The coming crash in the United States is something that will simply have to play itself out. To think it all could have been avoided is sad."
Sad? Yes. Evil? That, too.
John Sakowicz is a Sonoma County investor who was a cofounder of a multibillion-dollar offshore hedge fund, Battle Mountain Research Group. Ryan Morris assisted with research for this article. Send a letter to the editor about this story.