Dr. Mary Ruwart has issued a statement concerning the government’s proposed bailout of ailing NYSE-traded firms, Fannie Mae and Freddie Mac. The Libertarian Party, Bob Barr, and the Boston Tea Party’s Charles Jay have previously released statements on the matter.
Dr. Ruwart’s statement, while in many ways echoing the sentiments of the LP and Mr. Jay, is in stark contrast to Bob Barr’s proposal to give the Federal Reserve “greater oversight” powers over Fannie and Freddie. Dr. Ruwart says: “The Federal Reserve is the institution that lends the U.S. government money. We pay the interest on that debt. This bailout, indeed any program that requires the government to borrow, generates windfall profits for the members of the Fed, a private banking institution. Isnâ€™t that rather like putting the fox in charge of the hen house?”
Below is Dr. Ruwart’s statement in full:
When President Bush promised to prop up the failing Fannie Mae and Freddie Mac, he authorized a transfer of wealth from those who live from paycheck to paycheck to those who have enough money to play the stock market. These lending institutions are owned by stockholders, who saw their shares plummet to lows of 6.7 and 5.0 respectively before they were promised taxpayer bailout. After Bushâ€™s announcement, the stocks recovered to 13.4 and 9.2 respectively, making over 100% profit for speculators and saving investors from further stock free-fall.
Instead of investors losing most of what they paid for their stock, you and I will pick up the tab. The promised bailout has to come from our pockets, because we are the governmentâ€™s only source of income. Government must tax us or create inflation by borrowing (the most likely scenario). The buying power of our savings and paychecks will plummet. People on fixed incomes (e.g., seniors) will be hurt the most.
How much will the bailout cost us? It depends upon how many mortgage holders default. If everyone did, which is unlikely, we could be looking at $5 trillion. When you consider that the national debt is $9.6 trillion, you can see that this bailout could, in the worst case scenario, cost us about a third of our buying power.
That may only be the beginning, however. Reassured that they wonâ€™t be punished for risky investments, management will make the sub-standard loans that got them into trouble in the first place. In several years, weâ€™ll get to do this again! Where will it stop? It wonâ€™t! Other lending institutions will want the same subsidiesâ€”at our expense.
Some individuals are calling for more oversight of the two lending institutions by Congress or the Federal Reserve. The Federal Reserve is the institution that lends the U.S. government money. We pay the interest on that debt. This bailout, indeed any program that requires the government to borrow, generates windfall profits for the members of the Fed, a private banking institution. Isnâ€™t that rather like putting the fox in charge of the hen house?
Letâ€™s summarize here: speculators, investors and bankers profit. We pay the bill, most likely through inflation. The rich benefit at the expense of the not-so-rich. The poor, who wonâ€™t be able to cope with the higher prices which result, will become poorer.
We should not be surprised at this result. Big government always favors the rich. Like a wolf in sheepâ€™s clothing, Big Brother offers us a free lunch, while neglecting to tell us that we are the main course.