'Evening News' Praises $25-Billion GSE Bailout
Some call the housing bailout bill the biggest intervention in the U.S. economy since the New Deal, but â€śCBS Evening Newsâ€ť doesnâ€™t seem to mind.
The July 23 â€śEvening Newsâ€ť gave a glowing account of a â€ślifelineâ€ť bill working its way through Congress. The bill, which passed the House July 23, is meant to prop up beleaguered government-sponsored enterprises Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) and help homeowners refinance adjustable rate mortgages.
â€śThis afternoon, the House passed a bill that throws an estimated $25-billion lifeline to Freddie Mac and Fannie Mae â€“ the backbone of the home mortgage industry,â€ť CBS chief White House correspondent Jim Axelrod said. â€śThe bill makes it easier for both to raise unlimited capital from the government if needed and would allow hundreds of thousands of homeowners to refinance rather than face foreclosure.â€ť
But Axelrodâ€™s reporting didnâ€™t explain that the â€śunlimited capital from the governmentâ€ť comes from taxpayersâ€™ money, nor did he explain the bill eliminated the risks associated with lending.
Even liberal Economic Policy Institute senior economist Jared Bernstein, who said the bill is good for the economy in the short term, noted this substantial commitment from the federal government was bad in the long term.
â€ś[T]hatâ€™s why I said in the long-run, I think this doesnâ€™t solve the problem, it kicks it down the road,â€ť Bernstein said on CNBCâ€™s â€śKudlow & Companyâ€ť July 23. â€śAs I said on this show the other night, as long as Fannie and Freddie have now an explicit government guarantee, youâ€™ve got moral hazard deeply embedded in there and thatâ€™s a problem.â€ť
â€śItâ€™s bad in the short run, unless you are either a highly paid Fannie executive or currently a staffer for any Democratic member of a Congressional Banking Oversight Committee, in other words, a future highly paid Fannie execute [sic],â€ť Bowyer wrote. â€śIn the long run, this will be a huge transfer of wealth to a corrupt bureaucratic and inefficient bureaucracy from the rest of us tax payers.â€ť
But Axelrod saw the increase in the value of Fannieâ€™s and Freddieâ€™s stock as an approval from the financial community.
â€śWall Street seemed to agree today,â€ť Axelrod said. â€śAfter the president said he wouldnâ€™t veto [the bill he had previously opposed], shares of Fannie Mae shot up by close to 12 percent. Shares of Freddie Mac rose by 11 [percent].â€ť
However, Axelrodâ€™s analysis that Wall Street approved of the legislation is misleading. The stock prices reacted because a federal guarantee makes investment in Freddie and Fannie less risky. The stock prices didnâ€™t increase because the entire financial community approved of the massive government commitment.