“In the short-term,” Libertarian presidential candidate Bob Barr said in a press release, “government has little choice but to provide an explicit but limited loan guarantee, thereby capping the public’s liability, now widely assumed to be without limit. At the same time, Congress must restrict the number and size of loans by Fannie Mae and Freddie Mac and set more substantial capital requirements, while authorizing greater Federal Reserve oversight of their operations. The organizations must begin downsizing their portfolios, reducing their risks, and reestablishing their financial credibility.”
In the press release, Barr also says that government intervention in private markets “almost always” comes to grief.
Read the full release.
Update: It has been alleged that IPR showed bias in not mentioning that Barr says he favors “privatization” of the two firms that already trade on the New York Stock Exchange, and whose “quasi” private nature is “quasi” due to the assumed government backing of their debt (an assumption that Barr wants to make a reality) and increased regulation of their business by the government and the Fed (which Barr wants to increase further). I did not think Barr’s contradictory “privatization” — which sounds more like making the firms less private — merited mentioning, but there you have it.
14 responses so far ↓
1 G.E. // Jul 17, 2008 at 1:16 am
I’d like Barr to explain how the “public” stands to lose by allowing Fannie and Freddie to fail.
2 Jerry S. // Jul 17, 2008 at 1:54 am
It get’s worse each week. I’m overlooking things to support BaldWIN to send a protest message to all those GULLIBLE moderate LPers who swung to him and made him the nominee! Lazz’e Faire libertarians truly need to stand up for true libertarian principles during the next four months of this temporary takeover of the Party…
3 Mike Theodore // Jul 17, 2008 at 2:02 am
…Or leave the party! Cause that makes sense.
4 G.E. // Jul 17, 2008 at 3:18 am
This press release is so absurd, my head almost exploded when reading it.
The “public liability” is ASSUMED to be “limitless” because it is ASSUMED that the government will bail out Fannie/Freddie… But this is just an ASSUMPTION. There is no guarantee. So Congress stepping up to make such a guarantee in no way “limits” the public liability — it CREATES the public liability.
This is the least libertarian thing Barr has said thus far, and that’s saying a lot.
The main characteristic of these GSEs that makes them “quasi” private is this assumed government backing. And it is only ASSUMED, as all of the financial textbooks make clear — it is NOT guaranteed. So Barr wants MORE government control over companies which are essentially private, along with taxpayer bailouts of those companies. And he presents this as a libertarian solution.
It has gotten to the point that I don’t understand how anyone calling themselves a libertarian can support this guy.
5 George Donnelly // Jul 17, 2008 at 8:25 am
leave the party … and go where?!
The GOP? A Ron Paul Republican?!
At this rate, maybe, because my state LP seems to have no problem with bailouts and continuing entitlements.
6 Steve LaBianca // Jul 17, 2008 at 9:42 am
Let’s see . . . Barr is totally out of the libertarian sphere in this crisis, he is doing nothing to support grassroots libertarianism, including local LP candidates, his meetups are floundering, his campaign fundraising is lethargic to say the least (remember Barr is a MEDIA superstar!) and his campaign seems to be disorganized.
Given Barr’s public recognition rate, he should be raising money about 10 to 20 times the rate that Michael Badnarik did in 2004. Is he? Hardly. I am not even sure he is raising ANY more money than Michael Badnarik did! If you factor in the purchasing power of the dollar this year as opposed to 2004, Barr may be raising LESS!
All in all . . . the Barr campaign is a complete failure, especially considering his buildup, as I expected.
7 G.E. // Jul 17, 2008 at 12:01 pm
I’m waiting for a Barr backer to defend this latest assault on libertarianism by Barr.
8 Jerry S. // Jul 17, 2008 at 1:23 pm
“I told you so ” really doesn’t help our cause at all. I don’t think leaving the Party is the right thing to do. It just splintters the already small Party into smaller and smaller voices. The LP has million of dollars worth of ballot access and infrastructure. It’s just not bright to throw that away.
If he gets what I think he will get in Nov. the ones who have been so GUNGHO for him will be disgraced. They won’t admit it, but it will be true. Victory has many fathers, defeat is an orphan! Of course the ones in paid LP positions will fight to hold on to their jobs, but they must be forced out at the quickest opportunity. The moderates will be much more receptive to a return toward 100/100 (nolan chart) control of the Party after this colossal “conservative” failure comes, as it looks like it will.
A candidate with status is needed to lead the effort. A former U.S. Rep is hard to bypass to most third party members, for a writer or computer consultant, etc. So, I alway keep an open mind for a celebrity campaign. I know of no U.S. Reps who would score 100/100, but there are several celebrities who do…(I apologize as I don’t think I have celebrity spelled correctly, but you understand me I hope).
I am no longer a 100/100 guy like I was back in my twenties and thirties, I would self describe myself a Moderate Libertarian now, however I know the Party needs to STICK to it’s HARDCORE principles and never NEVER run a POTUS candidate who isn’t even in the libertarian quadrant of the chart.
What is truly sad to me is that this election is the best one every to increase the LP strength and I just don’t see the growth happening that would be possible with a pure LP message this year. The people know we are facing SERIOUS problems and all they are hearing is Socialism, Socialism-Lite and Republican Lite. NO LIBERTARIAN message can be found…
9 Bill Woolsey // Jul 17, 2008 at 10:15 pm
Bob Barr’s press released called for Fannie Mae and Freddie Mac to be fully privatized. The libertarian position. That statement was the headline of the press release. It was the lead of the press release.
But that wasn’t even mentioned in this “report.”
I read a set of posts by people who apparently never even read the release. Just some selective quotes.
Default by Fannie Mae and Freddie Mac could easily result in costs imposed on the public. They default. 50% of the mortgages in the U.S. must be sold on the market and the proceeds used to provide partial payment to those who have lent to Fannie Mae and Freddie Mac. This fire sale of 1/2 of the mortgages in the U.S. will greatly reduce their prices. Banks hold 4 trillion worth of mortgages. Perhaps all banks would be insolvent. FDIC takes over all of them. FDIC”s reserve fund is wiped out. Now the taxpayer is on the hook for the losses of the now nationalized banking system.
Perhaps such a nightmare scenario could be avoided. But this is why those who oppose the existence of institutions like Fannie Mae and Freddie Mac often favor a more measured winding down of the institutions.
And one such scheme is outlined by Barr.
10 G.E. // Jul 17, 2008 at 10:41 pm
Total statist B.S. from government employee Bill Woolsey.
Barr calls for Fannie and Freddie to be privatized AFTER a taxpayer bailout to prop up the stock price.
What exactly makes them anything other than private now, aside from the implied line of credit through the Treasury — which Barr wants to make a reality rather than an implication — and increased regulation — which Barr wants to increase further, further empowering the Fed.
Your argument, that a massive sell-off by Fannie/Freddie of the mortgages they hold would result in much higher interest rates, the LP says “no credible economic commentator” agrees with you. And even if this were true, SO WHAT? Mortgage rates are kept artificially low by the Fed and Fannie/Freddie as it is. They SHOULD be higher.
Final point: Anyone with a mortgage that is securitized by Fannie/Freddie right now will not face any hardship whatsoever if these fascist firms are allowed to go belly up. It won’t make a difference to them who owns their mortgage.
Libertarians don’t offer “schemes.” They let bad investments clear the market.
The apologists for Barr have no shame.
11 G.E. // Jul 17, 2008 at 10:47 pm
“No credible commentator thinks that the failure of these two institutions would add even as much as one percentage point over the long-term to mortgage rates.” — LP press release.
Of course, Barr takes his talking points from the Bush administration, not LPHQ, and yes, there is a slight difference.
12 Bill Woolsey // Jul 18, 2008 at 7:32 am
This GE character again proves his incompetancy.
I teach economics at The Citadel, which is a state university. I do work for the state of South Carolina. I support privatization of The Citadel and all other public colleges and universities. I suspect the same is true of the libertarian economists who work at George Mason or Auburn. Anyway, ad hominem is a fallacy.
I don’t know that default by Sallie Mae and Freddie Mac would lead to a general banking collapse. I was just explaining how default could involve costs to the public.
Quoting the LP press release’s claim about no credible commentator is laughable. Is the LP national staff an “authority?” Argument from authority is always a fallacy, but it is ridiculous when the “authority” is a press officer from the LP.
The live issue is whether to protect these institutions or wind them up. The “wind them up” position is that their existence has only a small impact on mortgage interest rates. Letting ordinary banks finance mortgages and investment banks handle securitization (like Bear Sterns did,) would not funnel quite so much money into mortgages, and so the estimates of at most 20% higher mortgages costs. (adding 1% to 5%) Economists would generally say that this is a good thing because the money is better used elsewhere.
However, there has not been a debate on whether having Sallie Mae and Freddie Mac default on their debts is a good thing. That is, working through how the bankruptcy would be handled. And what would be the implications of liquidation.
For example, one “credible commentator” in the WSJ the other day called for the end of Sallie Mae and Freddie Mac. His proposal was for immediation nationalization, wiping out the stockhoders, and then selling off the regional offices.
The reality remains that Barr proposed privatizizing the institutions. GE ignored that because.. what? His opinion is that they are already private. An honest report would be that Barr proposes privatization, but then assert that they are already privatized.
The selective quotations were dishonest.
Anyway, if the two firms defaulted and were forced into bankruptcy, I don’t know that the liquidation would have to be exceptionally rapid. Whether there is a “fire sale,” impact on mortgage prices depends on teh speed of liquidation and the amount of other funds that can be brought to the market. There is no requirement that mortgages be marked to market for calculating bank capital. And, there is bank capital. There is no need to cover unisured deposits. So.. there are various ways in which losses would be mitigated to the public. Maybe there would be none.
On the other hand, lending to the instituions in the context of winding them up doesn’t necessarily involve any costs to the public.
Anyway, the free market position is that they should be wound up. The “default now” position is one version.
13 Bill Woolsey // Jul 18, 2008 at 7:46 am
I forgot to mention,
“Barr takes his talking points from the Bush administration..”
GE shows he doesn’t understand the issues. The Bush administration is working to increase the capitalization of Sallie Mae and Freddie Mac so that they can incrrease their holdings of mortgages. I think that their goal is to dampen the decrease in total mortgage lending caused by everyone else moving away from them. That is why the administration has proposed allowing the Treasury to buy stock.
The other side of the issue is to wind the institutions down. So, Barr is taking the side of the critics.
Most of those on the winding down side are proposing that this be done gradually. I think the gradual approach is best.
But I don’t know that expanding the authority of the treasury to lend to these institutions was necessary. There wasn’t a lot of evidence that they were having problems borrowing. That is, default didn’t seem iminent.
But none of this takes away from the reality that this space is not an Independent Political “Report.” Instead, it is a source for spreading black propaganda.
14 G.E. // Jul 18, 2008 at 12:23 pm
The potshot about your employment was uncalled for and I apologize. I wish I had a job of your distinction.
Who is talking about Sallie Mae?
The LP is not an “auth0rity” but it is interesting that Bob Barr (also not an authority) disagrees with his own party.
Yes, I ignored the bogus “privatization” aspect of Barr’s release because by the main criteria by which they’re not private, Barr actually wants to make them less so: Any economics or finance textbook will tell you that the government backing of FNMA and FHLMC debts is only “implied” or “assumed” (SLMA — why are you bringing it up?), and Barr wants to take this “assumption” and make it explicit with the LIE that doing so would “limit” the public’s liability! This is a PURE LIE, or, at best, a gross misunderstanding. Secondly, he said he wants to GIVE THE FEDERAL RESERVE MORE OVERSIGHT POWER. This is shocking coming from a s0-called “libertarian.”
Again, I’ll ask you: Aside from this assumed (but not explicit) government backing and the increased regulation, what actually characterizes Fannie Mae and Freddie Mac as anything other than private companies?
Any neocon from the War Street Journal who wants to “nationalize” anything is not “credible” in my book.
Now you’re saying government loans — i.e. taxpayer loans — won’t cost the public anything? Fine, then. Make it voluntary. Let’s see who lines up to loan Fannie and Freddie money without the force of government.
“Barr takes his talking points from the Bush administration..†— This was obviously an exaggeration, but it is much closer to the truth than you’re willing to admit. You say the Bush admin. wants to “increase the capitalization of Sallie Mae and Freddie Mac” — again, I’m not sure why you’re talking about SLMA but I’ll just assume you mean FNMA. Bush wants to increase their capitalization? SO DOES BARR. What effect do you think his taxpayer-funded-at-gunpoint “temporary” loans would have on the market cap of these otherwise private companies?
Yes, Barr’s position is LESS HEINOUS than the Bush admin.’s (having the government buy stock in the companies) but so what? It is still FAR from the libertarian position advocated by the Libertarian Party and Ron Paul.
THIS ALL BOILS DOWN TO Bill Woolsey saying that I should have said that Barr favors “privatizing” the companies and I didn’t. Yes, I didn’t say that he favored “privatizing” companies that by most criteria are already private, EXCEPT for those criteria by which he wants to make them LESS private.
This omission makes the site a “source for spreading black propaganda.”
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