I'm not going to pretend I know and understand all there is to know about the Fannie Mae-Freddie Mac bailout or make any predictions of how it will shake out. We seemed to get enough opinions on that. However, I do have some observations to make regarding the takeover.

Republicans tend to tout themselves as free-market believers, but it seems this is only allowed to occur when it doesn't hurt the bottom line. There would be positives and negatives to either bailing Fannie and Freddie out or allowing them to fail.

What I also find ironic is that this party claims to be for less government, yet it's bailing out government-sponsored enterprises while adding further government oversight. However, with a practically nonexistent private secondary market right now--hanged by its own greed and complexity--it's no wonder some see no other choice but a bailout.

At one time, not that long ago, there was a thriving private secondary market for mortgages. However, the concept almost seemed doomed to fail when checking the rear-view. Fannie and Freddie had high credit requirements compared to their private competitors, therefore much of the private market was left to take the loans with phantom salaries and other questionable practices, along with the good.

Another piece of this I can't quite grasp is why the government guards against monopolies in various industries, but Fannie and Freddie were permitted to hold half of the secondary mortgage market in their hands. If we're going to have these entities, anti-trust rules should be applied to help avoid any future government bailout drawn from additional tax revenue (another Republican no-no).

I also find it telling that the national credit union trades have provided measured and tepid reactions to the government action.

On a separate issue that NAFCU hasn't said much about publicly yet but must have viewed with great interest was NCUA Chairman Michael Fryzel's meeting with executives from American Share Insurance and the subsequent press release and photo that was distributed. This seems a great departure from the last couple of NCUA administrations, which have touted federal insurance over private. In the past, the NCUA has gone so far as to provide comment letters in more than one state that has considered the private insurance option for its state-chartered credit unions.

The NCUA has touted its backing by the full faith and credit of the U.S. government, something ASI obviously lacks. NAFCU was founded with the goal of establishing a federal deposit insurance fund and regularly brings up the Rhode Island collapse as an example of why private deposit insurance doesn't work.

I have a couple problems with this stance: one being that federal credit unions--NAFCU's constituency--cannot even have private primary deposit insurance coverage. However, they argue that depositors would not understand the difference between privately and federally insured credit unions if there was a failure of ASI. Sure, it's a possibility, but the states have rights and should be able to decide how the credit unions chartered in their states are run. Additionally, credit unions should have the right to decide, and further down the line, the members.

And now, before I get thrown off my high horse, I'd like to comment on something tangentially related to credit unions--Credit Union Times as a news publication. At our press time The New York Times was running an ad on its Web site homepage (www.nytimes.com), a characteristically clever Mac ad, completely in violation of traditional journalistic standards. The Mac guy appears in the banner across the top, but in a box to the right of the news text, the PC guy pulls an "editorial" he's penned across the box. The editorial on why not to buy Macs then appears as text in the box that actually has the word "Editorial" written across the top. The absence of any note that this is an advertisement demonstrates a lack of judgment in this case and the person responsible for approving the ad as it is running should be reprimanded for abandoning one of the most basic tenets of journalism and advertising.

I'm hard core when it comes to the church-and-state separation of editorial and advertising, so this really raises my hackles. Now, I'll just step down from my soapbox lest I slip.

--Comments? E-mail scooke@cutimes.com

Instant Insights /

The View From My High Horse and Soap Box

Related Stories

Recommended For You