Heads I Win, Tails--Well, I Still Don't Really Lose . . . .

In an excellent commentary on the Mother Jones website, James Ridgeway analyzes whether the bailout is, in fact, socialism taking root in America. He writes:

We'd probably be a whole lot better off if the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), which together guarantee more than 40 percent of the mortgages in the United States, had been "socialist from the start"—that is, government entities owned and run in the public interest. Instead, they are so-called government-sponsored enterprises, or GSEs—publicly chartered, but stockholder owned. They are run as private corporations, with an army of lobbyists to advance their interests, but with "implicit" federal backing. As Paul Krugman puts it, "This implicit guarantee means that profits are privatized but losses are socialized. If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose.

So, now we are applying that same "socialist" principle to Wall Street--that profits go to the shareholders, but if the losses are deep enough, then we temporarily suspend capitalism and become socialist for a while. Oh, but wait--they got in trouble trying to help "us" out--you know those of us trying to buy a $400,000 house on a $30,00 income.

Herbert Hoover tried a similar public-private setup with the Federal Home Loan Bank Act of 1932, which aimed to support banks in making loans to homeowners. But its impact was limited, and when Franklin Roosevelt came into office, he asked Congress for legislation that focused more directly on the needs of working-class and middle-class homeowners, rather than the lending institutions, through something called the Home Owners' Loan Corporation.

The Democratic leadership apparently didn't miss class that day; they are (IMHO rightly) insisting that what worked in the past didn't just focus on the institutions, but on the rest of us.

In discussing the bailout, Mr. Ridgeway points out that neither side is proposing out-and-out government ownership of the mortgage loan agencies, even though that may ultimately prove less costly.

He also points to the parallels to Democratic proposals for Universal Health Care; should this immediate crisis be resolved with a public-private "socialistic" solution, there will be precedent for health care to follow.

I think it interesting that both campaigns are handling this situation carefully; when deliberative action requiring both finesse and leadership are called for, it is the candidate themselves who must tone down the electioneering--with catchy slogans and 10-second sound bites--and demonstrate how they might actually govern.

Socialism, capitalism, public-private partnerships, regulatory oversight. Folks, this is complicated stuff, and requires a steep learning curve on the part of "hoi polloi" before pulling the ballot box lever.

But it beats filling the air waves with discussions on lipstick, moose stew, and other prattle.