Taxation Without RepresentationSubmitted by SIERRAHPBT on Sun, 09/07/2008 - 09:53
Posted On: Saturday, September 06, 2008, 7:41:00 PM EST
Taxation Without Representation
Author: David Duval
This is absolutely pathetic. For days now we’ve had to listen to Bill Gross, co-chief of Pimco, demand that the government take over Fannie Mae and Freddie Mac which make up half the U.S. mortgage market. From what I can gather, it would appear that Gross was at least privy to the negotiations and the decision by the Treasury Department to proceed with the takeover.
Once again it’s the ordinary American taxpayer that will get stuck with the bill. According to the Bloomberg story below, about 61 percent of Gross's holdings were mortgage-backed securities as of June 30, mostly debt guaranteed by Fannie, Freddie or government agency Ginnie Mae.
Surprise, surprise. It looks like common shareholders will get wiped out while preferred shareholders, mostly Asian banks, will get bailed out by the American taxpayer. This is a theme that is playing out far too often in a BS poker game where the deck is stacked heavily against taxpayers and your average investor.
Paulson Plans to Take Control of Fannie, Freddie (Update1)
By Alison Vekshin and Dawn Kopecki
Sept. 6 (Bloomberg) -- Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.
Paulson met with Fannie Mae Chief Executive Officer Daniel Mudd and Freddie Mac CEO Richard Syron yesterday to tell them of the decision to put the companies into a conservatorship, where they would be removed from their jobs, according to a person briefed on the discussions. A public announcement is expected this weekend, the person said.
The decision follows the Treasury chief's repeated comments to lawmakers in July that he wasn't likely to use taxpayer funds to prop up the federally chartered, shareholder-owned firms hit by $14.9 billion in losses the past year. The shares of both companies slid since Paulson won powers to inject unlimited funds in the companies, and their borrowing costs rose.