The most valuable lesson I learned from the year I spent in Washington (1982-1983, on the staff of the Council of Economic advisers — I was the senior intl economist, the senior domestic economist was a guy named Larry Summers. What ever happened to him?) was the extent to which senior government figures have absolutely no idea what they’re talking about.
So when I read something like this:
“Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?” House Minority Leader John A. Boehner (R-Ohio) said in a statement.
and people ask what on earth Boehner might mean when he talks about taxpayers “rewarding” institutions that are owned by taxpayers, I go for Occam’s Razor: Boehner doesn’t have some complicated notion in mind, he either doesn’t know that the government took over F&F months ago, or he just doesn’t get this “government-owned” concept. [Emphasis in original]
Huh, that is surprising. But of course, what’s even more surprising is that we taxpayers would shift our funds around in such a pointless fashion. I mean, I didn’t transfer $200 billion from my checking account to my wallet yesterday, so why would I do the same with my Fannie Mae property?
Oh, it’s because F&F are going to buy stuff with our money, or they’re going to guarantee the value of certain assets, using our money as the backstop. That’s why the government is authorizing money in the first place; that’s why they are picking $200 billion and not, say, $200 trillion–even though according to Krugman, the latter number would just be a meaningless accounting trick.
Note that I am not necessarily defending the wisdom and intelligence of John Boehner; his statements are no doubt calculated for political effect.
But what I am saying is that Boehner’s statement is perfectly sensible. It is Krugman (and DeLong) who are falling for the crudest of fallacies when they think the taxpayers can’t possibly lose on agencies that they “own.”
Anyway, I’m a little bearish right now. I want to sell my shares of Fannie and Freddie. Does anyone have the correct broker contact info? I seem to have misplaced the laminated card that Henry Paulson mailed me back in September.