http://www.bloomberg.com/news/2013-06-03/senators-near-plan-to-abolish-…
I was reading this article from Bloomberg. It discusses a bi-partisan proposal to end Fannie Mae and Freddie Mac and to create in its place a mortgage re-insurer for catastrophic loss only. I have mixed emotions about the proposal; however, what stood out to me is the passing, non-chalant way that the author of the article discusses crony capitalism. It's so entrenched into the Wall Street and Washington, D.C. culture that it's not even a big deal anymore.
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"The two government-sponsored enterprises have begun posting record profits after drawing a total of $187.5 billion in aid from taxpayers to stay afloat after the housing crisis brought them to the brink of bankruptcy. Heartened by the change of fortune, hedge funds including Paulson & Co Inc. and Claren Road Asset Management LLC have been buying shares of the companies’ junior preferred stock and urging lawmakers to drop plans for abolishing them.
"The discussion draft of the bill says any proceeds from the liquidation first would go to the U.S. government as the senior preferred shareholder in each of the companies, and then to holders of junior preferred shares, followed by holders of the common shares.
"Fannie Mae (FNMA)’s 8.25 percent of preferred shares were trading at $8.75 at 11 a.m., up 7 percent from yesterday’s close of $8.20. They have climbed from $1.67 at the end of last year. The securities have a par value of $25."
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So we have 2 hedge funds buying up shares of government sponsored enterprises that were bailed out by the tax payer and using their connections and influence to urge lawmakers to drop plans for abolishing Fannie and Freddie so that they can profit from their investments in preferred stock.
I'm reminded of Occupy Wall Street movement. They targeted Wall Street for attempting to influence Washington to their benefit. But the truth is, government is so big and influential that it can pick winners and losers in legislation and in bureaucratic decisions. It makes no sense for Wall Street to not hire former government bureaucrats to attempt to influence government.
Hate crony capitalism? Support constitutionally limited government.
