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Fannie, Freddie to Be Kept Off Federal Budget
Washington Post ^ | September 13, 2008 | Lori Montgomery

Posted on 09/13/2008 3:07:22 PM PDT by DeaconBenjamin

The White House budget office said yesterday that it has decided not to incorporate mortgage-finance giants Fannie Mae and Freddie Mac into the federal budget, citing the temporary nature of the Treasury Department's takeover and "the level of federal ownership" of the firms.

The decision affects the way public expenditures on the two companies will be reflected in official budget projections. Treasury Secretary Henry M. Paulson Jr. has pledged to invest as much as $200 billion to keep the firms solvent.

On Tuesday, two days after the takeover, officials at the Congressional Budget Office announced that the deal had bound the government so tightly to the firms that their business operations, assets and liabilities should be included in the government's balance sheets.

Yesterday, Office of Management and Budget director Jim Nussle said he had decided differently, but may "reevaluate their budgetary status in the future, should conditions change."

In the meantime, Nussle said in a statement: "We will ensure the government's financial relationship with the [the firms] is transparent in the budget and Financial Statements of the U.S. Government, including details on the implementation of the current conservatorship and any federal assistance, the financial health of the entities involved, and the current and projected fiscal impact on government finances."

(Excerpt) Read more at washingtonpost.com ...


TOPICS: Business/Economy; Crime/Corruption; Extended News; Government
KEYWORDS: fanniemae; federalspending; freddiemac; govwatch; omb

1 posted on 09/13/2008 3:10:21 PM PDT by DeaconBenjamin
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To: DeaconBenjamin

Is this good or bad?


2 posted on 09/13/2008 3:12:29 PM PDT by chaos_5 (http://www.cafepress.com/chaos_5)
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To: DeaconBenjamin

Heh, heh. Why not? Bear Stearns and Lehman have achieved great success by keeping their Level Three assets off-budget, and they now stand at the very pinnacle of Wall Street...er, wait. ;)


3 posted on 09/13/2008 3:13:14 PM PDT by Mr. Jeeves ("One man's 'magic' is another man's engineering. 'Supernatural' is a null word." -- Robert Heinlein)
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To: DeaconBenjamin
Goodie, goodie... Free money for everyone!

We are all gonna be millionaires

4 posted on 09/13/2008 3:13:40 PM PDT by An Old Man ("The limits of tyrants are prescribed by the endurance of those whom they suppress." Douglas)
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To: DeaconBenjamin

Reminds me of the last couple of guns I bought. Wife never knew about them. They were off budget, too.


5 posted on 09/13/2008 3:13:54 PM PDT by Hardastarboard (I have Zero Tolerance for Zero Tolerance policies.)
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To: DeaconBenjamin

HMMMM . . . private business or gov’t, private or gov’t? Do we own them both now? After all WE are the gov’t by way of money coming from our taxes. Pathetic. I want to go on a tour of my new businesses. Shall we do a bus tour or all meet there by plane? Out of control.


6 posted on 09/13/2008 3:15:29 PM PDT by GOP Poet
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To: DeaconBenjamin

Put it all in the budget and let us deal with the reality of the gluttonous, greediness that has taken over our gov’t and its leaders that we vote in. Time for us to all look at these damn books. Denial is not a river in Egypt.


7 posted on 09/13/2008 3:20:04 PM PDT by GOP Poet
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To: DeaconBenjamin

Bad idea. Turns out that we have no balance sheet for the US govt anyway, and this makes it worse. SS liability numbers anyone?


8 posted on 09/13/2008 3:21:10 PM PDT by RKV (He who has the guns makes the rules)
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To: chaos_5

Don’t waste time looking at the budget. Watch the debt.


9 posted on 09/13/2008 3:21:55 PM PDT by DManA
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To: DManA
Like Social Insecurity, couldn't they just not count this as debt. They seem to have some creative accounting up on capital hill.
10 posted on 09/13/2008 3:25:22 PM PDT by chaos_5 (http://www.cafepress.com/chaos_5)
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To: Hardastarboard
Reminds me of the last couple of guns I bought. Wife never knew about them. They were off budget, too.

LOL
I'll have to remember that one.

11 posted on 09/13/2008 3:26:40 PM PDT by chaos_5 (http://www.cafepress.com/chaos_5)
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To: DeaconBenjamin

Apparently the Federal Budget is now the new “living Constitution”, where it is twisted and pulled like taffy to say whatever the hell those in charge of its care want it to.

Creative Accounting.


12 posted on 09/13/2008 3:28:43 PM PDT by LostInBayport (John McCain is the Luckiest Man Alive...mere mortals such as we can only wonder why...)
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To: DeaconBenjamin

Man, this Fanny/Freddy business sure sounds fishy.


13 posted on 09/13/2008 3:28:50 PM PDT by shteebo
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To: DManA
Don’t waste time looking at the budget. Watch the debt.

The on-the-books debt or the debt including the off-the-books obligations?

14 posted on 09/13/2008 3:30:17 PM PDT by DeaconBenjamin
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To: DeaconBenjamin

No problem, Treasury will hold onto them until the housing market starts back up and then take the public again with massive profits for the taxpayers.


15 posted on 09/13/2008 3:32:03 PM PDT by palmer (Some third party malcontents don't like Palin because she is a true conservative)
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To: DeaconBenjamin

I don’t get it.

Treasury giving them $200B but that $200B isn’t accounted for anywhere in the budget?

The money is coming out of thin air or something? Magic money?


16 posted on 09/13/2008 3:33:20 PM PDT by sf4dubya (I rebelled against my parents by becoming a conservative)
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To: palmer

Don’t they have to sell the Fannie/Freddie securities starting in 2010???


17 posted on 09/13/2008 3:35:44 PM PDT by sf4dubya (I rebelled against my parents by becoming a conservative)
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To: chaos_5

It is lying. It’s just like the Social security funds that the dhimmicratic congress has been stealing, spending, and replacing with IOU’s which only someone as completely crooked as a congresscritter can call “a lock box”.

We are so totally screwed. I hope that some of these idiots are alive when the end comes, because I’m going to start a possee and go critter hunting.


18 posted on 09/13/2008 3:37:38 PM PDT by Da Coyote
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To: sf4dubya
As I have mentioned, some observers have concluded that when the central bank's policy rate falls to zero--its practical minimum--monetary policy loses its ability to further stimulate aggregate demand and the economy. At a broad conceptual level, and in my view in practice as well, this conclusion is clearly mistaken. Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero.

The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning. A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior). Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C. November 21, 2002

19 posted on 09/13/2008 3:41:21 PM PDT by DeaconBenjamin
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To: DeaconBenjamin
Is the war even on budget, or do we keep it off budget because being in Iraq again this year was a completely impossible to predict surprise? The whole on-budget/off-budget thing is a complete farce. It's just a matter of Congress making rules on what they can spend, and then breaking those rules without coming out and saying "we said screw the rules". Similar to a drunk drinking directly from the bottle because it only counts as alcohol if it is from a glass.
20 posted on 09/13/2008 3:44:36 PM PDT by KarlInOhio (Whale oil: the renewable biofuel for the 21st century.)
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To: sf4dubya
Don’t they have to sell the Fannie/Freddie securities starting in 2010???

Maybe they can sell them to the Fed.

21 posted on 09/13/2008 3:47:05 PM PDT by palmer (Some third party malcontents don't like Palin because she is a true conservative)
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To: GOP Poet
For some reason that triggered this:

DenalispaceDenial

Any questions?

22 posted on 09/13/2008 3:48:53 PM PDT by null and void (When you bang your forehead on the ground five times a day, you get brain damage.)
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To: DeaconBenjamin
The on-the-books debt or the debt including the off-the-books obligations?

It includes all of the bonds sold to cover spending, but not things which the government has promised in the future, like future years' Social Security payments. The "Lockbox" is included in the debt, which is why the debt increased every year under Clinton even though there were budget surpluses.

23 posted on 09/13/2008 3:49:15 PM PDT by KarlInOhio (Whale oil: the renewable biofuel for the 21st century.)
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To: DeaconBenjamin

Wow, so can I keep my income off of my tax return??


24 posted on 09/13/2008 3:53:12 PM PDT by DTogo (I haven't left the GOP, the GOP left me.)
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To: DTogo
Wow, so can I keep my income off of my tax return??

You and what army? (In other words, when you are a government, and not an individual.)

25 posted on 09/13/2008 3:55:15 PM PDT by DeaconBenjamin
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To: An Old Man
We are all gonna be millionaires

Unfortunately (for me), my net worth is going in the wrong direction.

26 posted on 09/13/2008 4:12:55 PM PDT by Doe Eyes
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To: TigerLikesRooster; ex-Texan

Living In The Land Of Make Believe Ping


27 posted on 09/13/2008 4:38:57 PM PDT by Travis McGee (--- www.EnemiesForeignAndDomestic.com ---)
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To: Travis McGee
Live long and prosper, Gumint! /sarc
28 posted on 09/13/2008 4:46:14 PM PDT by TigerLikesRooster (kim jong-il, chia head, ppogri, In Grim Reaper we trust)
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To: null and void

:-D Like the way your mind works.


29 posted on 09/13/2008 5:04:29 PM PDT by GOP Poet
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