Obama's Aunt Fannie and Uncle Freddie

[MikeDC]

Oh, I know they didn't do it entirely on their own, but when I see the Democrats (or at least the particular Democrats poised to run things if they win the election) having any support at all, and when I see folks who nominally claim to be Republicans saying that Replubicans need to be voted against this time (to teach them a lesson) I mostly think about Fannie Mae and Freddie Mac.

A few points:
* The fact these things are going tits up will affect us, meaning all of us, and how this happened is NOT being talked about much.

* In large part, this is because it's tremendously complex and tremendously scary. It doesn't make for a simple story line. I teach college level economics and it's fairly difficult to understand everything myself (and in fact I wouldn't say I do), much less explain what's going on to my students. It's impossible (at least for someone as un-gifted as me) to explain what's going on and what should be going on in a way that most people will understand at a gut level. It's just too outside of the scale, scope and experience of the average person.

* Because this is an omnipresent issue and very complex, it so far hasn't made for a compelling political weapon in anyone's hands.

* I'm fairly confident based on my understanding of things that one party made more than trivial efforts to put better oversights in place before these things went tits up. The other party fought those efforts tooth and nail. That party's Presidential nominee, two other presidential aspirants this year, and previous presidential nominee constitute the four biggest recipients of Fannie and Freddie lobbying money.

A while back we had a discussion of which political side of the spectrum was the heir (or whatever you want to call it) of fascism, and a point that should have been made there was that, as an economic philosophy, fascism was explicitly what we'd today call "crony capitalism" or something along those lines. Industries were free to be monopolized while remaining quasi-private and for-profit, so long as those running it were good party men. If one looks at the relationship between the CEOs and boards of Fannie Mae and Freddie Mac, the federal government, and the Democratic party, it would be quite reminiscent of the relationship between business leaders, the government and the party described by Albert Schweitzer in Big Business in the Third Reich.

 

[Denny Crane]

How distinct is the difference between crony capitalism and govt. owned and run monopolies where those running it are good party men?

 

[MikeDC]

How distinct is the difference between crony capitalism and govt. owned and run monopolies where those running it are good party men?

There's some difference, especially in how the people running the companies enrich themselves. In a fascist economy, the guys running the business typically are profit maximizing entrepreneurs. They still have to sell product and they get money for doing so. In a socialist economy, the monopoly profits tend to accumulate, often in non-monetary forms of power and control to more bureaucratic managers.

This ends up being the difference between something like post WW II Spain (fascist) and the Soviet Union (socialist). Both ended up with relatively stagnant economies, but in Spain there was a bit more push to do something about it and fix it before it became a complete disaster. In the USSR... not so much.

In the grand scheme of things though, it's like saying one messy diaper was a bit easier to deal with than another.

 

[Denny Crane]

Isn't "selling product" another way of saying "rationing what the nation can produce?"

 

[MikeDC]

Isn't "selling product" another way of saying "rationing what the nation can produce?"

Sure, but only in the same way that communism, fascism and capitalism are all means of "rationing" scarce resources. All economic systems are responses to scarcity. The question is which system provides the incentives to make the best use of resources. Because fascism generally provides a slightly more direct profit incentive to the managers than direct government production, there's a bit more incentive to produce efficiently.

As Fannie Mae shows, however, that "bit more" doesn't mean a fascist sort of enterprise should be considered a good thing in any sort of normal sense.

 

[Denny Crane]

In a communist system, you get the really big apartment with the nice view, the best food, and other things that managers would buy with their profits. In spite of the utopian ideal of the philosophy, people naturally need incentives of some sort.

Was Fannie Mae truly fascist? Or merely a poorly regulated govt. backed entity.... The Post Office is semi-private, too, and I don't think anyone would call it fascist.

 

[MikeDC]

Yes, Fannie Mae was fascist in the literal sense of how a fascist economic system works. It's ostensibly private, but in practice part and

The USPS is not. It's not semi-private. It's a publicly owned operation; a branch of the US government. In that sense it's much more akin to the Soviet Union or other entities where the government actually owns and operates the means of production.