You can’t turn on the TV without Americans screaming and moaning about the horrible debt they are in and their unaffordable home loans which force them into foreclosure.

The government has responded by taking over Freddy Mac and Fannie Mae mortgage companies.  As a result, stocks have risen and government officials are hailing this takeover as an economic savior.

The truth is in fact the polar opposite.  Instead of a savior, this takeover is a Band-Aid on an exploding aorta belonging to a hemophiliac known as the United States economy.

Companies rising and falling are key components of competition.  By aiding failing institutions in this manner, productivity and quality will fall even faster.

Economist Arnold Kling from the Massachusetts Institute of Technology states:

We have to assume that sooner or later some of the institutions involved in mortgage finance will fail. The policy should be to promote a housing finance system where mortgage risk is spread among dozens of institutions. That way, the failure of some firms can be resolved through mergers and orderly restructuring, without exposing the financial system to the sort of catastrophic risk that is represented by Fannie Mae and Freddie Mac.

Basically, supporting Mae and Mac is an economically irrational decision.

Furthermore, who helps pay to “recapitalize” the mortgage companies?  Oh that’s right…the government will pay for it since they have loads of money legally plundered…I mean taxed from you and me.

The companies have already been through the wheels of capitalism and failed.  Because of their failure, the estimated cost will be an estimated $100 billion.

At times like this, one wonders; how Mae and Mac could tap into the safety net of government?  The answer comes from an unlikely source…CBS News:

Fannie and Freddie now boast nearly 150 lobbyists, spending almost $175 million combined over the past decade alone. That’s more than pharmaceutical giant Pfizer and defense contractor Boeing.

The CEO’s who presided over the demise of Fannie and Freddie are out the door as well, walking away with some $30 million.

While every American, it seems, is paying the price.

WHAT SCARES ME THE MOST…is people like Mark Zandi who try to claim the upside is:

Effectively, the federal government has now become the nation’s mortgage lender…This takes a major financial threat off the table.

WHAT?? Do people honestly believe the US government near monopoly is not a threat? What is next? Maybe this one…

Centralization of credit in the hands of the state, by means of a national bank…

This ‘centralization’ of credit is also known as measure number six of the Communist Manifesto

The takeover is classic government interference into the naturally occurring market forces of supply and demand. These forces are inevitable. Short term patchwork like this only worsens the long term effects.

But that’s okay…Mark Zandi has a solution for that too:

The takeover will complicate matters for the next president, who must figure out how to gracefully reprivatize these institutions in some form.

No, we privatize now, not gracefully, efficiently.