Thursday, July 31, 2008

No Limits On Fannie and Freddie Political Donations

Pres. Bush signed the housing bailout bill into law today, which also explicitly backs up Fannie Mae and Freddie Mac with taxpayer money. One thing that hasn't changed under the law is the amount of political influence they weild. According to this WSJ op-ed piece, "an underreported part of this story is that Majority Leader Harry Reid refused to allow a vote on Republican Jim DeMint's amendment to bar political donations and lobbying by Fannie and its sibling, Freddie Mac." This is a serious problem, and assures that there will be further problems at both institutions.

I recently decried the influence that public-sector unions have bought, and called for barring them from political activities. In that case, it's an obvious conflict of a union donating money to the politicians who appoint the opposing negotiators. In the case of the now federally-backed Fannie and Freddie, "letting them ladle cash all over Washington amounts to using government-guaranteed profits to lobby for continued government protection. Congress sets the rules in favor of Fan and Fred, which then repay the Members with cash from their rigged profit stream." (also from the WSJ piece.) That's a fairly obvious conflict, no?

The responsible thing to do would be to break both of these monsters up, and sell them off to private businesses (banks, investment companies, etc.) over time. No government-backed company should be allowed to hold multiples of the annual GNP on it's balance sheet, as these do. However, does anyone think that this will happen, with their political patronage ability unconstrained?

Read the entire piece (linked above) for more on Freddie and Fannie's political shenanigans (look at their "charity" donations-wow!), but I'll close with their closing paragraph:

Mr. DeMint has pledged to offer his amendment to end Fannie and Freddie lobbying to every Senate bill through Election Day. We wish him luck, but he's up against the reality that Congressional leaders and the companies want to return as quickly as possible to the business of greasing each other's palms. The companies are even hosting swanky receptions at the Republican and Democratic nominating conventions in a few weeks. Consider it a Fannie and Freddie "thank you" for their bailout.

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