Given the credit market debacle and failures of Bear Stearns,Fannie, and Freddie, it's incredible how little concrete action ordebate has taken place about how to correct the systemic problemsthat have led to these monumental taxpayer bailouts. The assumptionis that new and more stringent regulation is coming. Are we talkingabout something as dramatic as the return of Glass-Steagall(separating investment banks from commercial banking) or what? TheCMBS market clearly failed at regulating itself -- the ratingagencies proved totally lame and the B-piece buyer cartel didn'tlive up to the hype about kicking out all the bad loans fromofferings. It appears there may be a Congressional battle royalover what to do with the mortgage GSEs, including reconstitutingthem or doing away with them. And should it be government policy toencourage people to own homes when many people would be better offnot owning them?
The Fed and Treasury Secretary are so wound up in averting onecrisis after another, they don't have time to ponder long-termsolutions. Politicians, meanwhile, don't want to confront anycomplex issues at election time. Let's not muddy the water on realreform and get people confused about why taxpayers may be on thehook for $100 billion or more in various bailouts when candidatescan vamp about stopping the Bridge to Nowhere or defend why theytook per diem expense reimbursements for living in their ownhome. And meanwhile, the federal deficit is projected at $407billion, the largest ever.
So yes, let's cut everybody's taxes some more, including theex-bosses of Freddie and Fannie, who leave with typicalmulti-million dollar severances.
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