Bob Barr contradicts LP: Government ‘has to do something’ to bail out Fannie/Freddie

“I think right now, doing nothing would not be advisable,” said Bob Barr when asked about whether the federal government should bail out the government-sponsored enterprises, Fannie Mae and Freddie Mac. “As much as a libertarian, I don’t like to see the government get further involved, with yet another sector of the economy, I think that because the government has caused this problem, similar to the savings & loan problem the government caused a generation ago, it has to do something. The question is: Can it do enough by providing some temporary security, some temporary back-up, as long as it’s done with the thought in mind that there has to be long-term congressional action here to restructure and reformulate the very way Freddie Mac and Fannie Mae operate, I think that would be an advisable solution. But not doing nothing.”

This, of course, is in direct contradiction to a press release issued today by the Libertarian Party.

Tom Knapp offers his thoughts here.

Here is video footage of Barr’s support for a bailout of the GSEs — entities in which risk is socialized while profits are privatized:

31 thoughts on “Bob Barr contradicts LP: Government ‘has to do something’ to bail out Fannie/Freddie

  1. hogarth

    Jesus. Barr looks like a bum off the street in that interview. What the hell happened to his tie?

  2. George Phillies

    I had somehow missed that in addition to all the other wings, our party also has a functioning Libertarian Socialist wing. Fantastic discovery, G.E.!

  3. G.E. Post author

    Thanks, George, but it is your friend Arthur Torrey who alerted me to it via Knapp’s blog. So it was a third-hand discovery by me.

  4. darren

    Who is surprised? Barr has said he’s a mainstream libertarian who wants to move policy in the direction of small government, not destroy the foundation on which everyone’s home mortgage currently rests. Of course Fannie/Freddie are an abomination, the WSJ has been opining on it for a decade. The question is how to reform them into true private entities without precipitously hurting tens of millions of current and wanna-be homeowners.

    If there’s any surprise here, it’s that LPHQ has zero message coordination with the presidential campaign.

  5. Arthur Torrey

    Worth pointing out that it really doesn’t do much to the people that have mortgages under Fannie / Freddie if they go bust… Those mortgages are assets (albeit not very attractive ones) – which would be sold to other entities if F&F go under. They wouldn’t vanish, and people would still be expected to pay them at the existing, contractually agreed on terms. If they’ve been making their payments, and continue to do so, the only real change would be where they mail the check…

    If they hadn’t been making payments, then they’d be dealing with a different entity for renegoitiating or foreclosing, but the process would stay the same…

    The only people that would really be burned if F&F went under would be the stockholders / investors that made poor judgement in their investments, and / or failed to require F&F to manage their assets in a prudent and responsible manner, instead of purchasing a bunch of junk mortgages….

    ART

  6. Gene Trosper

    What interests me more than what Barr said is this: what can libertarians propose that is actually workable?

    Criticizing comes easy to us, but finding workable solutions is a bit more difficult.

  7. G.E. Post author

    Gene – “Let them fail and clear the market.”

    That’s what a libertarian would say.

    Come on, now, I know you’re a Barr man, but there’s NO WAY you can defend this.

    Barr is NOT a capitalist, period. He thinks debt-based inflationary fascism defeated Communism, and he believes in mortgage fascism, too.

  8. G.E. Post author

    BTW: This is hardly a “radical” solution — even the ultra-moderate libertine leadership of the party says “LET THEM FAIL.”

  9. Gene Trosper

    Who is surprised? Barr has said he’s a mainstream libertarian who wants to move policy in the direction of small government, not destroy the foundation on which everyone’s home mortgage currently rests.

    Whether one considers themselves a “radical” libertarian, a “mainstream” libertarian or one of those “constitutionalist” libertarians, the fact is that in general, voters cast their ballots largely on quality of life issues. This is certainly a quality of life issue.

  10. Gene Trosper

    I agree with “let them fail”, but beyond that, what can libertarians propose to prevent this from happening again? I only ask that as a mental exercise for everyone. These are the kinds of issues our candidates will be asked and it would be good if they had some GOOD, workable solutions that will interest not just the media, but voters themselves.

    Just saying “let them fail” to the media may feel good and sound good, but that will essentially shut the door to our candidates who say that.

  11. Gene Trosper

    G.E.: here’s a little secret…I don’t agree with Bob Barr on everything.

  12. sunshinebatman

    Barr press release :


    http://www.bobbarr2008.com/press/press-releases/56/bob-barr-says-privatize-fannie-mae-and-freddie-mac-end-government-subsidies/

    excerpts – The latest financial crisis involving Fannie Mae and Freddie Mac, which guarantee home mortgages, demonstrates yet again how government intervention in private markets almost always comes to grief. Both Fannie Mae and Freddie Mac are nominally private, but were created by Congress and enjoy significant advantages over truly private companies, including cheaper borrowing, lower capital requirements, and an implicit federal guarantee.

    As a result, the two organizations behaved irresponsibly…

    In the short-term, government has little choice but to provide an explicit but limited loan guarantee, thereby capping the public’s liability, now widely assumed to be without limit. At the same time, Congress must restrict the number and size of loans by Fannie Mae and Freddie Mac and set more substantial capital requirements, …

    American taxpayers cannot afford additional special interest subsidies and bail-outs.

    The largely unaccountable Federal Reserve has made many of these problems worse, by extending further bail-outs and creating additional taxpayer liabilities. Congress must limit the Fed’s activities as well, and force it to act with greater transparency and oversight.

  13. Deran

    “Free markets” is the rubric used to explain what got us into this current capitalist collapse.

    “Markets” are never “free”. All societies regulate the economy; like the US gives them barrels of welfare, tax breaks that shift wealth from working people to the multinationals, etc.

    There is always social regulation of the economy; the real question is who is doing the regulating. In the US the multinationals, and their lobbyists, oversee their own regulation via purchase of elected representatives that draft tax and regulatory law.

    I of course favor re-nationalization of home mortgages under a restructured federal home loan agency, returning home ownership to direct federal stabilization and control.

    No more speculation on housing. I think it creates social instability and siphons wealth from middle and working class people up into the coffers of the multinationals.

  14. tsipos

    This is why the LP’s candidates should focus on EDUCATION and NOT VOTES.

    We won’t win the election anyway, so we may as well make good use of the public forum an election brings, by educating the public.

    Ruwart or Kubby would have educated the public about the mortgage crisis. Maybe changed a few minds, and thus made us an incrementally more libertarian country in the process.

    But the “vote getters” are impatient with education. They’d rather promote Republican Lite candidates that won’t “scare voters.”

    Barr/Root is a wasted opportunity. We can either run Radicals who won’t win but will teach. Or Reformers who won’t will and won’t teach. The LP chose the latter.

  15. Nexus

    It sounds to me like Barr is saying that the government screwed this up(big suprise there) and they should fix it. After it’s fixed, Fannie and Freddie should be privatized. I’m not a fan of government interference in most forms, but I do perfer them to clean up their own mess instead of just letting everything fall to pieces and leaving it to someone else to clean up.

  16. George Donnelly

    Darren, moving away from statism will hurt. No way around that.

    D’oh. Regretting my donation to Barr doubly now, what with the Helms comments and now this.

    The right fix is:

    – let them fail. failure can be good.
    – abolish the fed
    – remove all obstacles to alternate currencies
    – let all these idiot companies that are underwater fail
    – much more…

  17. Sean Scallon

    The LP has been “educating” voters for the last 30 years. What have they gained from it?

    Don’t you think you can “educate” voters better if you get on TV and actually register in the polls?

  18. hogarth

    It sounds to me like Barr is saying that the government screwed this up(big suprise there) and they should fix it.

    Sure. Seems to me I heard people saying the same thing about Iraq.

    When will we learn that the entity which crewed something up is exactly the WRONG agency to turn to for a remedy?

    Basic logic.

  19. Fred Church Ortiz

    Either years of educational campaigns led to the present one, or they were powerless to prevent it.

  20. Steve LaBianca

    Add in this comment by Barr”

    BARR: But the ultimate goal, I think, has to be a very firm commitment to restructure Fannie Mae and Freddie Mac.

    and we see that Barr is either afraid of alienating his conservative base, or he isn’t a libertarian, because he isn’t saying eliminate Fannie Mae or Freddie Mac.

    Either way, Barr’s statements are totally indefensible from a libertarian perspective, regardless of what the phony libertarian Gene Trosper says.

    BTW Trosper, though you may not agree with everything Barr says, a real libertarian would agree with half or less of what Barr says (now), and about 20% of what Barr had done in the congress.

  21. Steve LaBianca

    Gene Trosper // Jul 15, 2008 at 10:43 pm

    Just saying “let them fail” to the media may feel good and sound good, but that will essentially shut the door to our candidates who say that.

    Again, from Trosper’s perspective, the focus is on votes, and not principle. True, saying “let them fail” ought to be followed up with how the market process facilitates market participants to pick up the pieces and find the best solutions, but by proposing “restructuring” and “doing something”, Barr is proposing a statist solution, and libertarians ought to “shut the door” on that!

  22. Steve LaBianca

    Barr doesn’t say,

    “‘let them fail’ and follow up with how the market process facilitates market participants to pick up the pieces and find the best solutions”

    because he is no Ron Paul . . . he has so little understanding of free market economics, that he is ill equipped to answer this way.

    Did Harry Browne have this problem . . . did Michael Badnarik even, have this problem? No they didn’t.

    And here’s another important piece of information . . . Mary Ruwart, nor Steve Kubby has this problem either. Why? Because full fledged, long-time libertarians understand the vital importance of the free market economic principles, and how they are integrated with Libertarian solutions. Barr, being a run-of-the-mill conservative is clueless.

  23. G.E. Post author

    The government caused the mess by creating companies (fascism) and now it should fix the mess?

    Why?

    What do you people think will happen if Fannie and Freddie fail? Will everyone who has a mortgage through them be thrown out on the street?

    No.

    They won’t face any additional hardships whatsoever.

    This is a bailout for INVESTORS who chose to invest in horrible companies with the thought that the government would bail them out.

    See the $6 billion swing on the Fed’s comments last Friday. SIX BILLION DOLLARS changed hands because of a few words from Bernanke.

    The government causes most if not all problems. Should it also bail out GM? I can make a solid case that GM’s problems are largely caused by the government — at least as much as those of Freddie and Fannie.

  24. Thomas L. Knapp

    GE has it pretty much pegged.

    Fannie Mae and Freddie Mac’s stock price has been inflated for a long time on the expectation that if they fall down, Uncle Sugar will swoop in and pick them up.

    Fannie Mae and Freddie Mac have been able to get away with buying/guaranteeing riskier than usual mortgages for a long time on the same internal perception — “the usual rules don’t apply to us, because we have effectively unlimited credit. If we scream, Washington will answer.”

    You think letting them go down the drain they’ve been swirling around is a radical position? Brother, you ain’t SEEN radical.

    Radical would be declaring all mortgages held by the two to be fulfilled, all guarantees of mortgages made by the two null and void, selling off any remaining physical assets, distributing that revenue pro rata to FM/FM guaranteed mortgage holders as partial catch-up payments for those loans in default, and then terminating the FM/FM charters and making their stock certificates into frameable collectibles rather than tradeable securities.

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