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by Free Market Duck

Weekend at Fannie’s
(Sep 11, 2008)

 Like the comedy, “Weekend at Bernie’s,” in which two young computer employees working for their boss, Bernie, discover at a party at Bernie’s beach house that Bernie is actually dead – knocked off by The Mob – and in which the two youths drag poor Bernie all over the party pretending he is still alive because they are scared shitless of the killers, Hank Paulson (Sec of Treasury) and Ben Bernanke (Fed Reserve Chief) spent the entire last weekend dragging zombies Fannie Mae and Freddie Mac all over another private party pretending that bankrupt mortgage giants Fannie and Freddie were still alive.  Unlike the movie, “Weekend at Bernie’s,” however, the punch line to Paulson’s and Bernanke’s comedy, “Weekend at Fannie’s,” is that the two federal regulators have dressed dead Fannie and Freddie up in a new suit of clothes, the FHFA, stuffed $200 billion between their dead fingers, hid $62 trillion in credit default swaps in their underwear, and dumped both corpses back onto the New York Stock Exchange as if nothing had happened.

Update: Sep 15, 2008:  In the sequel to "Weekend at Fannie's," called "Dead Stocks Tell No Tales," released two days after Fannie and Freddie's dead bodies were dumped back onto the New York Stock Exchange, their stock prices fell to zero and the SEC finally removed Fan and Fred's corpses from the floor of the NYSE to the city morgue.  R.I.P.

Washington, DC – Whoa, girl friends, pull up the floor and pour yourselves another hot cup of Rocket Java.  You, the taxpayers, are now the proud owners of millions of houses all across America.  Big and tall, large and small, whoop-tee-doo, they belong to you all.  Yessirree, Bob, you are the new landlord of the United States, holding $5.5 trillion worth of mortgages which, according to calculations, should be paid directly to your bank account in monthly installments year after year after…, never mind…, we’re just kidding.  It’s just another Fascist Fairytale by the Federal Government.

   Why did Hank Paulson, Sec of the U.S. Treasury and Ben Bernanke, Fed Reserve Chief, nationalize Fannie Mae and Freddie Mac?  Not because Fannie’s stock had dropped to a coupla bucks last Friday.  And not because Freddie’s stock had dropped lower than whale dukie.  They did it to (1) enrich their banking buddies and (2) to avert a $62 trillion CDS (Credit Default Swap) on Wall Street, which would have bankrupted the entire U.S. financial system and plunged the Dollar’s value to zero.

   What is a Credit Default Swap?  It’s a fancy-dancy name for “insurance.”  Insurance for what?  Insurance for holders of – and, therefore, against the catastrophe of -- stocks and bonds going down the tubes – i.e. collapsing lower than whale poop -- such as the millions and millions of Fannie Mae and Freddie Mac stocks and bonds that were falling over the edge of the Grand Canyon, down 90% from last year.  Make no mistake about it:  the nationalization of the twin Frannies was more about saving America’s Dollar and financial system than anything to do with the housing industry.

   This begs several big questions:  (1) why did the U.S. Government get into the Fascist Business Model of mortgaging houses in the first place, (2) by what authority does Congress delegate the U.S. Treasury Department to become a National Mortgage broker, and (3) who the fudge does Hank Paulson and the central bankers think they are, anyway?

   First, the U.S. Treasury Department has no business playing socialism in the mortgage industry.  And neither did the U.S. Congress.  Aren’t we taking this altruistic collectivism of NAZI home ownership a bit too far?  Yes, NAZI-ism.  You remember good ol Adolf and his political party before, during, and after WW II:  National Socialism.  That is, socialism on a national scale.  Isn’t that exactly what Hank Paulson and Ben Bernanke just implemented with central banking approval and a re-engineering of the U.S. Treasury Department?  Following every great hyperinflation, the Storm Troopers are not far behind.

   Second, somebody please show me where it states in the U.S. Constitution that Congress can make anything but gold or silver coin legal tender.  And after you find that mysterious clause, please show me where Congress obtains the authority to transform the Treasury Department into a National Mortgage Broker.  When you find it, please drop me an email.  And, Supreme Court Justices, spare me your twisted rendition of the Commerce Clause in which Habeas Corpus, the First Amendment, and everything else in the Constitution and Federalist Papers can be suspended for whatever collectivist reasons you can dream up.

   Third, Hank Paulson is the new Monetary Messiah of the Twenty-First Century.  Nobody questions good ol Hanky Panky.  He engineered the Bear Stearns Rape on Wall Street this year.  He engineered the $168 billion taxpayer “Stimulus Joke.”  He engineered the counterfeiting of hundreds of billions of new dollars – with the explicit help of the Federal Reserve – to pump into the pockets of his buddies on Wall Street in order to ha-ha “save” America from, get this, not enough paper money.  Yes, girl friends, not enough deficit credit, not enough fake “capital,” not enough T-Notes for China, not enough U.S. Dollars for subprime mortgages, liar mortgages, SIVs, CDOs, CDSs, and the Piece de Resistance:  Fannie Mae and Freddie Mac.

   The current recession is the result of a huge comedy of errors, starting with the basic assumptions that one doesn’t require a tangible commodity as real money, or as backing for paper promissory notes used as money, that fractional reserve banking is not just another word for “counterfeiting” the U.S. Dollar, and finally with last weekend’s hallelujah Resurrection of bankrupt, deader than a doornail, Fannie Mae and Freddie Mac, holding $5.5 trillion of U.S. mortgages.

   This entire scenario could be scripted into a hilarious comedy if it wasn’t so tragic for the U.S. economy and the loss of our constitutional rights.  In fact, Like the comedy, “Weekend at Bernie’s,” in which two young computer employees working for their boss, Bernie, discover at a party at Bernie’s beach house that Bernie is actually dead – knocked off by The Mob – and in which the two youths drag poor Bernie all over the party pretending he is still alive because they are scared shitless of the killers, Hank Paulson (Sec of Treasury) and Ben Bernanke (Fed Reserve Chief) spent the entire last weekend dragging zombies Fannie Mae and Freddie Mac all over another private party pretending that bankrupt mortgage giants Fannie and Freddie were still alive.  Unlike the movie, “Weekend at Bernie’s,” however, the punch line to Paulson’s and Bernanke’s comedy, “Weekend at Fannie’s,” is that the two federal regulators have dressed dead Fannie and Freddie up in a new suit of clothes, the FHFA, stuffed $200 billion between their dead fingers, hid $62 trillion in credit default swaps in their underwear, and dumped both corpses back onto the New York Stock Exchange as if nothing had happened. – FM Duck

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