Dean,

It also sounds like someone in the government listened to you since I heard that all the executives in the company were canned.

Dean, do you have video or transcripts of those debates? I'd love to read or watch those debates.

good job.

This was Dean's famous September 2002 PDB, "Housing Crisis Determined to Strike in United States," which was dismissed -- "No one could have anticipated..." and "You've covered your a**."

In later testimony, this will be referred to as merely a "historical document".

Dean,

So, in the long run ... is the government bailout of Fannie Mae and Freddie Mac in the best interest of the US economy, or not? What's your prediction?

IM- Mr. Baker will correct me on this if I'm wrong (and there's a high probability of that me being merely a historian and not a economic specialist) but this isn't a bailout, their problems run deeper than that. We bailed them out ~ a month/month-in-a-half ago when Paulson tried to artificially inflate the companies by guaranteeing investor profits with tax-payer money. This, inevitably, brought in investment but, also inevitably, this investment was short lived as those putting in the money were only doing it so that they could sell their stock again for its historic worth and make a nice on-paper profit. The best thing about the whole situation was that so few people did it, showing that investor euphoria has finally begun to die down a bit and be replaced with a bit of probity.

This is a nationalization. The U.S. government is buying the corporations whole-cloth and taking over their management. Those invested in it will eat a massive loss as the government will buy their stocks at current value or less as a favor to them.

From what I've read, this is being referred to as a bailout, so maybe I'm wrong about it, but it seems much closer to what happened to Northern Rock in Britain, but on a staggeringly massive scale. Given that I could be far off-base, a refresher on the issue would be appreciated if my analysis shows one is warranted.

Fannie/Freddie weren't guilty of causing the housing bubble any more than a number of banks, investment banks and hedge funds. They should, of course, have managed their risks much better. Had they done that, their financial position now would have been less precarious. But would that have in itself prevented the housing bubble from developing?

Gloat all you want Dean, but permit us to note that you remain a conventional economist wedded to conventional macroeconomic theory and approve this bailout of elite lenders to the detriment of workers.

Of course Dean is going to wedded to the elites. They are the one have given economists the power. Greenspan didn't get to the top by disciple of Ayn Rand.
When JP Morgan rescued the US during 1890s from default. He and his colleague effectively controlled the money supply.
If they are not going to get the subsidy how are they going to create high paying jobs that you so much deserve.

Julian- I think it is sort of a nationalization but in its report the CNN website stated that this was a receivership until they are back on their feet and then (the implication) they will be re-privatized. I agree the "The Economist" on this issue- nationalize then eliminate!

Ellen1910- a "Conventional Economist"? Please watch your language. Children can view this site.

Erik L: Ah, thanks for the info.

I dunno, I keep hearing that Fannie/Freddie were ways the Chinese et al. could funnel money back to us so we could buy more goods from them.

That was the message of a segment on this on NPR's "Morning Edition":
http://www.npr.org/templates/story/story.php?storyId=94377295

That's one way of looking at it.

The other way is that it financed the removal of our industrial base to foreign climes without the kind of civil disturbances you might otherwise expect from a dramatic collapse in the purchasing power of average working Americans.

Dean, when you ace a hole, a certain amount is gloating is appropriate and expected, even amongst gentlemen.

Even when Dean boasts out of frustration he understates the obvious.
I challenge anyone, anywhere to name one other Economist who stood, vocal & elequent, arguing correctly in front of the storm on Boskin, Glass-Steagal, housing AND our GSEs. These were not just tactical market calls, they were valient attempts to raise concern to what have become THE most pressing economic issues of our generation. Dean Baker got them ALL right, when we had plenty of time to right the course. So, where were the rest of our fabled Economists?
Thanks again for sharing your reasoning and your passion.

Did anyone catch Dean's piece in TPM? I post the address here: http://tpmcafe.talkingpointsmemo.com/2008/09/08/republican_philosophy_handouts/

Boils down to: Bootstraps for thee, but none for me.

Dear Dean,

I too would gloat.

My concern is that the neo-liberal model turns out to be nothing more than the repackaging of the old dictum "privatize the profits and socialize the costs". And my further worry is that this "necessary" bail-out underpins the delightful strategy of the so-called "risk taking entrepreneurial class" from making sure that they DO NOT bear the risk, but that non-consenting third parties (the tax payers) bear the risk. Surely you are conventional enough an economist to have some serious concerns with such externalities?

Thanks for the compliments. Of course is to make a difference, I can't say I was of much help on the housing bubble.

anyhow, I do think the takeover of Fannie and Freddie was the right move. They are certainly not being bailed out in that their shareholders are taking a bath -- as they should.

The bondholders are being bailed out, but this is really just making good on an implicit commitment that the government would stand behind their debt.

Of course we did not absolutely have to stand behind the debt (there were no guns at anyone's head). But, it would have led to enormous turmoil in the housing market and the financial markets more generally if the government let these bonds go bad.

At the least, we would see mortgage rates jump by a percentage point and a rise of 2 or even 3 points is not out of the ballpark. This would certainly help deflate the bubble more quickly, but it would also lead to a number of other financial institutions collapsing. It would probably also send house prices far below their trend level and make the recession far worse.

Would we end up at a better place at the end of the day for the mayhem? Perhaps, but I couldn't in good conscious suggest this sort of experiment. We know it would cause real serious harm in the short-term to tens of millions of people. That's a big price to pay for cleaning up the muck -- especially when we don't know what we end up with when the collapse is over.

In Dean Baker's article originally published in The Guardian on CEPR.net "Freddie's Dead" (http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/freddie-s-dead/) he makes some great points about whether we want innovation from the mortgage business. I was walking into a restaurant and heard a real estate agent talking into his cell phone that the price of some house was high, so they were going to have to get "innovative" and "creative." I think this is surely a misapplication of these terms. With mortgages money is borrowed in a lump sum and paid back over time. Lets not make it out to be esoteric. Innovation is less important in finance than consistent standards and too often fancy words are used to describe what is better described by the word "fraud."

Typically decisions on who will run something is based upon who owns it. Freddie and Fanny are ultimately owned by the taxpayers, therefore a public entity should run it. Unless GM is interested in public ownership over its assets, I do not see why the public should ever agree to private ownership "privatization" of its assets.

I don't miss any of Dean Baker's comments, and I found his old Economic Reporting Review one of the highlights of my week's reading. (I am a retired prof of Political Economy). That said, the very best analyses of the credit/financial crisis-housing bubble can be found in the writings of Michael Hudson (www.michaelhudson.com) and Henry C.K. Liu, who also has a website, also accessible on Asia Times. Utterly stunning analyses, interweaving the details with the big picture. Hudson is especially good on why a bailout of the mortgage lenders is dreadful news for working people. Dean is indispensable, but his left orthodoxy pays a price.

中联石化不锈钢管销售公司,专业经营各种不锈钢管,不锈钢板,高镍合金不锈钢管等,是国内知名的不锈钢管材料供应商,公司不锈钢管不锈钢管生产技术力量雄厚,经验丰富,是广大不锈钢管消费者的首选