Jul 27, 2008

Phil Duffy on the housing bill attempting to rescue Fannie Mae and Freddie Mac

You and I have just assumed responsibility for the irresponsible actions of these organizations and their investors. This has very little to do with home buyers and everything to do with bailing out bankers and investors. It has no effect on existing home owners. They already have their mortgages. It doesn’t matter to them if their mortgager goes out of business. The case that is being made for home buyers of the future is that they can’t do without Fannie Mae and Freddie Mac. But the market would move in to fill the role currently being played by these organizations. The market would be more prudent, but it is a lack of prudence that has caused the housing bubble and the demise of these government sponsored enterprises (GSEs).

Certainly the action by Congress with Fannie Mae and Freddie Mac, the bailout of Bear Stearns and hundreds of other interventions in the market have nothing to do with free enterprise and constitutional government. So what label accurately describes the nature of our current government? This was an issue addressed by Friedrich von Hayek, the author of The Road to Serfdom (Hayek was the co-winner of the 1974 Nobel Prize for Economics). He pointed out that socialism and fascism have many similarities. Certainly if the government owned Fannie Mae and Freddie Mac outright, that would be socialism. The government ‘sponsors’ but doesn’t own these entities. We the people don’t own them either, although we are forced to fund them. They will still be owned by private investors who will benefit at the expense of the rest of us. That describes a system called fascism. Surveillance of ordinary citizens is also a characteristic of fascist nations. As difficult as it may be to accept, our government is becoming increasingly fascist by any objective measure. We can no longer claim to be a constitutional republic because we refuse to be limited by our own Constitution.

Having lived through the World War II days and grown up in its aftermath when the question was asked, “How could Nazi Germany have occurred?”, I remember how we lulled ourselves to sleep. It couldn’t happen here. The problem was in the inherent nature of German stock (today we would call that DNA). We were biologically different, or so we convinced ourselves. The truth is that we are on the road to serfdom.

Phil Duffy, July 27, 2008

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