The Bush administration’s plan to use the Federal Reserve and the U.S. Treasury to save two mismanaged quasi-governmental mortgage companies has already revived confidence in the U.S. free enterprise system both at home and abroad.“This just proves that American capitalism works,” said an unnamed analyst from Bear Stearns. “The self-correcting mechanism of free markets still happens as if guided by an invisible hand. This week we caught another glimpse at that hand. Too bad Adam Smith wasn’t alive to see it.”
Around the globe, investor faith in the U.S. economy was buoyed by the news that the federal government had stepped in to prop up Fannie Mae and Freddie Mac, the two firms which either hold, or back, about half of the mortgages in the United States.
“The true measure of strength is one’s willingness to seek help in time of need,” said one investor. “When Freddie Mac and Fannie Mae came crawling to the U.S. taxpayer to bail them out, their executives boldly showed that they’re not afraid to be vulnerable.”
Confidence also swelled because the two mortgage giants will get rescued using OPM — other people’s money — another signal to investors of the stability and integrity of these firms.
President George Bush, speaking to a group of skittish fiscal conservatives today at a gathering sponsored by The Club for Growth, said the rescue plan made sense.
“Fannie Mae is not some faceless bureaucracy,” said President Bush. “It’s an American institution. It’s personal. So when we use taxpayer dollars to keep it from going under, we’re not trying to save some mortgage company out there, my fellow Republicans, we’re trying to save your Fannie and mine.”
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