Skip to comments.Fannie, Freddie to Be Kept Off Federal Budget
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 ...
Is this good or bad?
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. ;)
We are all gonna be millionaires
Reminds me of the last couple of guns I bought. Wife never knew about them. They were off budget, too.
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.
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.
Bad idea. Turns out that we have no balance sheet for the US govt anyway, and this makes it worse. SS liability numbers anyone?
Don’t waste time looking at the budget. Watch the debt.
I'll have to remember that one.
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.
Man, this Fanny/Freddy business sure sounds fishy.
The on-the-books debt or the debt including the off-the-books obligations?
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.
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.
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.