Pardon me for interrupting the great national debate–on lipstick, ads, earmarks, polls and other "crucial" issues–by inserting a modest suggestion: since we, the taxpayers, are now on the hook for hundreds of billions of dollars to bail out Freddie Mac and Fannie Mae (a lot more than the grand total of all earmarks in the federal budget), the management of those two institutions should now be handed over to the public. Which is the topic of a column I wrote today…
The column appears in Newsday. The upshot is this:
We got into this mess, in part, because Fannie and Freddie were run to enrich their executives – who should have been fired long ago – and to maximize profits. Rather than focus on their primary mission of stabilizing the housing market and making sure average Americans could get loans, the companies became part of the problem – egged on by a coterie of investors who cared only about jumping on the quick-buck conventional wisdom that inflated the housing bubble. So how do the American people stop this from happening again?
We need is to make sure the boards of the two institutions are run by, and for, the public. There’s a precedent. The Home Owners’ Loan Corp. was born in 1933, when the country faced another massive housing-loan crisis. The corporation ended up owning one in five mortgages; in today’s figures, it lent nearly three-quarters of a trillion dollars. Most important, it was run by a public-government board.
Once Freddie and Fannie emerge from the just-imposed receivership under the auspices of the Federal Housing Finance Agency, Congress should require that their boards be restructured. A third of the board should come from the ranks of elected officials, appointed by the president, speaker of the House and the Senate majority leader, with input from representatives of state and local governments, since the collapse of the housing market has implications for stable economic and social governance beyond Washington.
Another third should come from the ranks of nonelected officials, including unions whose pension funds are deeply involved in housing investments and consumer advocates.
The last third could contain representatives of private industry, but they need to be free of any inherent conflicts of interest – meaning, they cannot benefit from any rise or fall in the value of the institutions’ stock price.
Frankly, the implications of how Freddie Mac and Fannie Mae are run–and what that means for the economy–are a whole lot more crucial than the monumentally foolish focus on "The Bridge To Nowhere"…and Democrats and progressives bloggers/strategists/critics are lowering the debate as much as Republicans. It’s moronic.
We have a chance, with the government’s rescue of two institutions that have backed $5 trillion in mortgages, to not only demand public control over the boards of the two institutions but, more important, have a real debate over the proper role of government and how the public exercises some oversight over the "free market".
People, priorities please!!!
