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<p>The Fannie Mae and Freddie Mac bailout provides a clear indication of which candidate really stands for change. Senator McCain is outraged that the two mortgage finance lenders will most likely receive billions of dollars from taxpayers. It is in essence a form of “semi-socialism” as Lawrence Kudlow sees it. In his recent article, “McCain Talks Straight on Fan-Fred Reform”, Kudlow cites former House majority leader Dick Armey, who remarks that the deal between Fan-Fred and Washington is a way of “privatizing gains while socializing losses.” Thus, when these government-sponsored enterprises (GSEs) operate successfully, throw kickbacks to politicians, and establish private hedge funds, the public does not receive any of the benefits, but when the GSE’s suffer, the American taxpayer is expected to bail them out.</p>
<p>Now I completely understand both the obligation that GSEs like Fan and Fred have to those whose homes they insure and the argument that they are “too big to fail”, but the fact of the matter is that a stronger free market approach to the mortgage market will mitigate any future problems. In a recent Wall Street Journal article, Holman Jenkins writes, “Fannie and Freddie now are statutorily backed by taxpayers, so taxpayers are the real owners of nearly as many foreclosed houses as the rest of the country's 8,500 banks and thrifts combined.” Holman’s piece entitled “How to Shake Off the Mortgage Mess” makes an interesting case that for the sake of the American taxpayer, who will bear the enormous costs, the government should stop trying to salvage unsalvageable homes. But, he also comments that GSE’s like Fan-Fred should be nationalized and “later privatized.” This is the exact reform that the McCain campaign has proposed. While Obama supports the continuation of “semi-socialism”, which will lead to an even larger national deficit and a weaker dollar, John McCain has distinguished himself as the candidate of real change by standing up to Washington policies that damage the American economy.</p>
<p>McCain wrote in an op-ed for the St. Petersburg Times that if Fan-Fred receive any money, “the management board should be immediately replaced, multimillion dollar salaries should be cut, and bonuses and other compensation should be eliminated. They should cease all lobbying activities and drop all payments to outside lobbyists.” Lawrence Kudlow also points out that McCain wants tighter regulation of the two institutions. This would more or less cover the nationalization, which Holmes advocates. On the other hand, unlike Obama, McCain wants to apply practical market based solutions to the housing mess. Here is where McCain’s campaign has shrewdly figured that any meaningful reform must include privatization of GSE’s like Fan-Fred. As a result, Kudlow writes that one of McCain’s economic advisors, Steve Forbes, has led the charge urging the dissolution of “Fannie and Freddie into 10 or 12 companies, completely severing their ties to the government." Furthermore, Forbes anticipates that competition among these private companies will lead to a "revived" housing sector.</p>
<p>Obama likes to claim that McCain stands for “the failed policies of the past.” However, with a complete lack of thoughtfulness and innovation in his supposed “solutions” for America, Obama continues to reveal his persistent faith in big government remedies, which, in terms of fiscal irresponsibility and excessive spending (not tax cuts), reflect a continuation of unfortunate domestic policies of the current administration.