Information Landmine

"The Americans keep telling us how successful their system is. Then they remind us not to stray too far from our hotel at night." - An un-named EU trade representative quoted during international trade talks in Denver, Colorado, 1997.

Tuesday, September 09, 2008

Maverick financial policy

The FT covers the differing responses to the Fannie/Freddie nationalisation from the Obama and McCain campaigns:
Jason Furman, economic policy director to the Democratic candidate, on Monday said a Barack Obama administration would privatise those elements of Fannie and Freddie that could be better -carried out by the -private sector, while retaining a smaller government-charter institution supporting low-income, affordable housing.

The McCain campaign has said it would privatise both institutions after they had been restructured and the credit markets had stabilised.

”McCain has been out there with a hasty ’privatise and shrink’ approach,” Mr Furman told the Financial Times. ”It has been ideologically driven and not sufficiently mindful of some of the public functions that Fannie and Freddie currently perform. The trick is how to disentangle their private and public functions and how to manage the complex task of the transition.”

Douglas Holtz-Eakin, John McCain’s senior economic adviser, linked the Republican nominee’s plan to privatise both institutions with the broader campaign theme of reforming Washington.

”The financial problems at these institutions are a legacy of crony capitalism, the absence of transparency and accountability, and the implied backing of the taxpayer,” he said in a statement.

”Senator McCain will get real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatises and eliminates their links to the government.”

Now, obviously I'm not exactly impartial, but it's pretty clear to me from this that the Obama campaign has given the problem some thought, and that the McCain campaign's serving up some wishful thinking in a light wrap of right-wing rhetorical posturing. Roughly paraphrasing, the idea seems to be: "We'll privatise just as soon as we've assumed away all the hard parts." Then they tack on some boiler plate about the evils of government. Which is all very well if that's what floats your boat, but not terribly enlightening on how they plan to deal with the reality of two mamoth GSE's that had to be nationalised.

Couple that with the fact that Sarah Palin apparently doesn't even understand how Freddie and Fannie have been working up till now, and you have to wonder how the press are still managing to float that meme about the Obama campaign being weak because it's all rhetoric and no policy.


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