The Biggest Bailout Ever

Nate W — Mon, 15 Sep 2008 17:08:13 GMT

Cross posted at myDD

Like the proverbial thief in the night, the US federal government snuck in Friday night and bailed out Fannie Mae and Freddie Mac. I hate to say I told you so, but I wasn't surprised. They didn't really have a choice:

The Ministry of Finance and the Federal Reserve had no choice but to intervene due to one single reason: The collapse of Fannie Mae and Freddie Mac could have precipitated a core meltdown of the American bank and stock market systems, dragging the rest of the world with it into the abyss.
That is because these two banks are responsible for $5.3 billion (3.7 billion euros) of America's $12 billion (8.4 billion euro) total mortgage debt. That corresponds to one third of America's gross domestic product.

But never fear, the CEOs of the collapsing companies are safe:

Under the terms of his employment contract, Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be "without cause," according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.
Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company's troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003.

Meanwhile more than one half of the state governments in the U.S. are running massive deficits too, but no bailout is in store for them.

As I've been posting for a while, the money being spent on bail outs for financial entities is larger than the combined deficit of all the states. This report from the Center on Budget & Policy Priorities shows that the states are now being hit hard by the same hard economic times that dropped Bear Sterns and now Fannie and Freddie:

At least twenty-seven states, including several of the nation's largest, face budget shortfalls in fiscal year 2009. Of these 27 states, specific estimates are available for 22 states and the District of Columbia; the combined deficits of these 22 states plus the District of Columbia are expected to total at least $39 billion for fiscal 2009 -- which begins July 2008 in most states. Another 3 states expect budget problems in fiscal year 2010, although some of those gaps may occur earlier than expected.
...
The 22 states in which revenues are expected to fall short of the amount needed to support current services in fiscal year 2009 are Alabama, Arizona, California, Florida, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Rhode Island, South Carolina, Vermont, Virginia, and Wisconsin. In addition, the District of Columbia is expecting a shortfall in fiscal year 2009. The budget gaps total $39.1 to $40.8 billion, averaging 8.9 - 9.3 percent of these states' general fund budgets.

More on 'small town values'

MurlandGuy — Sun, 14 Sep 2008 17:48:09 GMT

There has been a lot of interesting chatter around the blogs that has come up due to the popularity of the topic of "small town values" among politicians and the national commentariat. I posted a bit on this earlier here. Since there is general consensus among thoughtful folks - at least those not in the biz of political propagandizing - that there ain't such a thing, it would be more accurate to say that the interesting discussion centers more on small town life rather than the alleged unique values of these places.

The post on this topic by Devilstower over at Daily Kos is thoughtful and even-handed. And there is a pretty good discussion in the comments to Atrios' properly (IMO) dismissive one-sentence post on these alleged values. I've gathered a few of those comments in response to Atrios' post that I thought were particularly insightful, and pasted them in below the jump...
In Atrios' comments, some folks are glad to be living in small towns and rural country, and others were "glad to get the f*** out" of these places as soon as they could, but no one is defending - or seriously trying to define - the concept of "small town values". There is general agreement that, for a lot of the people using the term, it is a racist dog whistle (small town values = "values" of pre-civil rights, segregated America). One comment I thought was spot on as well, was that a lot of people extolling the virtues of 50s America did so (and still do so) as a response to their revulsion at the turmoil that commenced in the 60s.

The following works pretty well for me, though not as an exclusive one-explanation-rules kind of thing:

Ozzie and Harriet don't live in a small town any more. June and Ward left some years back too. Kitten ended up working in the Valley.

'Small town values' are imaginary, filtered thru '50s TV series - TV series that were all made on the back lot at DesiLu or Warner Brothers, written by NYC exiles who lived near the beach. The only 'small town' any of those guys had any experience in was Westwood Village, the San Vicente market and Woodland Hills.

GWPDA yclept Damaged Historian | 09.14.08 - 10:36 am

However, the following comment was also intriguing. I don't know the extent of its veracity, but from reading a lot of her comments over there, Moonbootica impresses me as being quite the student of this sort of thing:

writers have been extolling the 'virtues' of small towns and the countryside since the very first cities appeared

back in Ancient Roman, writers like Plutarch wrote about the 'corrupting influence of city' and the whole idea that if you didn't have land then you had no loyalty

Moonbootica, Brit Lefty | Homepage | 09.14.08 - 10:43 am

From a college prof who grew up in small-town upstate New York, and still lives in the same house (HRC = Hillary Rodham Clinton):

I don't think it's so much of a population number, actually. It's more about where things are and are not happening. In small town, nothing much happens. Economies falter and the dream is left behind.

Sneer all you want, but in my area, HRC did wonders for "small-town values" by bringing jobs here, so people's kids didn't have to move away to earn a living.

The city is seen here as a place which lures away our young people with the promise of wealth, but no family. It is widely resented.

From a commenter living in small town Georgia:

Well, I'm certainly not going to get defensive, but let me go over a few of the things I like: nights that are very dark and very quiet, seeing the children of the people I went to school with going to the same school, knowing the mayor personally and laughing when he gets up at the monthly music show in the park to sing "Blueberry Hill," walking to work, paddling my kayak about 1/2 mile from town and feeling like I'm completely cut off from civilization, knowing not just my neighbors but practically everybody who's been in town for a few years, the vibrant little arts community that has grown up in the last 20 years, going to city hall for something and having the secretary greet me by name, getting a start from having a possum peer into the back door at night, not having to stop at a traffic light every block when I drive somewhere, having a town square where people actually gather and do things, racoons in the fig tree out back, election nights when everybody gathers at the county courthouse to watch the vote tallies.

I could go on, but I would also note that the negatives people are pointing out do exist, and I have seen every one of them when I have lived in cities, only more concentrated. Except maybe the fried squirrel.

Doc | 09.14.08 - 10:46 am |

Finally, here's a comment from someone who seems to be sharing a personal memory:

I always thought that small town values were about one or two really rich guys dominating the town council, the banks, the courts, the real estate market and all the time running things from the secret meeting rooms in the local Mason's Lodge.
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The final conclusion seems to be that small town life can be defined and discussed in concrete terms; small town values , not so much.

Free State Politics - Recommended Diaries

The Biggest Bailout Ever

More on 'small town values'