1929

The Plenary Powers of the Federal Reserve or, How to Privatize Profits, Socialize Losses

File under: How the poor pick up the tab for the rich; or is it, How the rich pick the pockets of the poor? You choose.

Hank Paulsen, U.S. Treasury Secretary, spoke to us all this morning. According to today's front page of the Wall Street Journal, Paulsen is "confident" that Congress will bail Fannie and Freddie out because:

... of their size and scope, Fannie and Freddie's stability is critical to financial market stability," he said in a speech at the New York Public Library. "Their continued activity is central to the speed with which we emerge from this housing correction and remove the underlying uncertainty in our financial markets and financial institutions."

That's a clue to a future grab at plenary power over the country's financial markets and matters.

Two other articles in the WSJ caught my eye over the past couple of days... The first, alluded to in the title, is Mark Gongloff's column yesterday, Like S&Ls? Paying the Tab for a Cleanup, about the possibility of the Government resurrecting a Resolution Trust Corporation to resolve the current Banking and Credit Crisis as its predecessor did to resolve the Savings and Loan crisis. The line about robbing the poor to pay the rich -- well, that's straight from NYU economist Nouriel Roubini. Don't believe him? Check out the numbers -- the S&L bailout cost the American taxpayer $76 billion dollars (according to the FDIC); the subprime bail out could cost us an estimated $1 trillion dollars -- 'nuf to make you gag on your godiva chocolate.