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Archive for July 14th, 2008

kkr state

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Worse than I was saying… Sebastian Mallaby in the Washington Post today:

As long as Fannie and Freddie retain their private/public form, private managers will invent reasons to grow courtesy of public assistance. The best shot at taming them is to bring them into the government. Then, once financial markets have stabilized, the government should shrink the institutions radically and spin them off in pieces, creating maximum space in the mortgage market for smaller private players.

The collapse of Fannie and Freddie’s share prices presents an opportunity to buy them on the cheap. Rather than rushing to prop up these behemoths, authorities should seize the moment: Nationalize — and then dismantle.

I should have known better when I clicked through the link that read Nationalization: A Solution for Housing. This is the Kohlberg Kravis Roberts version of nationalization, with the nation as a whole playing the part of Gordon Gekko. And, to echo some of the comments around here lately, establishes the state as the agent of decomposition of last resort, when none of the other boys have the wallets and balls to do the nasty (and profitable) work with the scapels and circular saws.
Above all else, it is perhaps the last, perverse turn of Reagonomics: nationalization as a weapon against the state sector itself. Think destruction of medical care through fiscally-minded nationalization – which is a tick or two away from what actually happened during the botched attempt by the Clintons back in the 1990s.

From the NYT today:

“If you’re a socialist, you should be happy,” said Michael Lind, a fellow at the New America Foundation, a research institute in Washington. “But you should really wonder whether you want people’s ability to pay for housing and college dependent on the motives of people in Washington.”

Yeah, I’m not so sure that I’m a very happy socialist, and yes, of course, it’s because of what I know about the “motives of people in Washington.” Cue Naomi Klein, cue Iraq / student loans analogies.

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July 14, 2008 at 10:01 am

Posted in economics