The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Eight Dirty Words... and the Mother of All Debt Bombs!

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


The April 16, 2014 article, “Senators Miss Sperling at Key Point for Housing Bill,” by Jon Prior, Kevin Cirilli and MJ Lee, probably should have appeared on “Page 6” of the New York Post – renowned for its gossipy tidbits about the Big Apple’s glitterati – instead of p. 10 of Politico, since it was a puff piece on Gene Sperling rather than a substantive analysis of a critical GSE reform effort.  For taxpayers, it is a whole lot less important to know which political grandee is not included in the GSE reform negotiations than it is to know what is included in the draft bill unveiled by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho).

The draft contains the following eight “dirty words,” guaranteeing an unprecedented bailout of the mortgage market if there is another housing downturn: “full faith and credit of the United States.”

As a result of these eight words, the national debt would jump by $5.1 trillion, or 29 percent, with one stroke of President Obama’s famous pen, from an already staggering $17.6 trillion to $22.7 trillion.  The “explicit guarantee” of Fannie Mae and Freddie Mac debt would occur despite the well-established fact that the GSEs’ bonds are not backed by the Treasury.  This action is both unnecessary and unaffordable; for this and other reasons, CCAGW opposes the draft bill.

Indeed, the only “complaint” about the legislation identified in the article is how the left laments the bill’s lack of emphasis on promoting affordable housing.  But that was a key factor in precipitating the mortgage crisis in the first place: creating a public policy objective for a financial institution.  The results are well-known and not particularly pretty.

When it comes to the prospect of another federal government takeover (and inevitable mismanagement) of a huge swath of the private sector, members of Congress should not be using eight words.  Instead, they should use three:  “Just say NO.”

 

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