What Others are Saying About the Blank Check Mortgage Bailout
“The bail-out of Fannie Mae and Freddie Mac by the combined forces of the US Treasury and the Federal Reserve Board is the ugliest exercise of its kind I have ever observed outside early transition economies and mature banana republics.”
– Professor Willem Buiter, London School of Economics
“The Sunday statement and plan by Secretary Paulson to rescue Fannie and Freddie is the ultimate implementation of socialism for the rich and the well connected.”
– Professor Nouriel Roubini, Stern School of Business at NYU
“It was a terrible idea. Putting taxpayers in bed with Fannie and Freddie's shareholders would only ratchet up the stakes. Congress would insist on showing a "profit" from this adventure. The game with the federal credit card would start anew.”
– HOLMAN W. JENKINS, JR., Wall Street Journal
“If Congress is determined to grant Paulson the authority to bail out the mortgage giants, it must not be in the form of a blank check.”
– Editors of the National Review
“I'm uneasy about giving this blanket authority without having any kind of checks.”
– Sen. Chris Dodd, Bloomberg, July 15, 2008
“When you're dealing with the taxpayer's money I don't think ambiguity has a place. We are potentially layering taxpayer resources on top of massive systemic risk.”
– Sen. Richard Shelby, Bloomberg, July 15, 2008
“The new law will not give the regulator either the mandate or the capacity of a bank regulator. The new law creates a cumbersome regulatory process to implement many parts of the bill. I’m afraid we will need to revisit the issue of the proper regulatory framework for the companies.”
– Thomas H. Stanton, author and fellow of the Center for the Study of American Government at the Johns Hopkins University
“Hank Paulson is running the Treasury the way he ran Goldman. He’s doing everything he can to meet next quarter’s numbers. I might do the same thing in his position. But it postpones a lot of bigger problems to the future, when he will be gone.”
– L. William Seidman, chairman of the Federal Deposit Insurance Corporation (FDIC) from 1985-1991 and first chairman of the Resolution Trust Company (RTC).
“Instead, taxpayers are being asked to trust that a regulator will do the right thing and impose some discipline on the companies after Mr. Paulson's rescue bill passes. But at the same time, Mr. Paulson is saying that the goal is to preserve Fannie and Freddie "in their current form." That sounds a lot like a get-out-of-bailout-free card.” – Wall Street Journal Editorial, July 21, 2008
“That formula comes at a heavy price. Fannie and Freddie were supposed to help Americans buy their own homes, by making the mortgage market work better. But it has been an awful deal for the taxpayer—a Fed economist calculated the implicit debt-guarantee was worth a one-off sum of between $122 billion and $182 billion. Because Fannie and Freddie barely lowered the cost of borrowing, little of this subsidy went towards boosting home ownership. Instead, just over half—about $79 billion—went straight to their shareholders.” – The Economist, July 17, 2008
