Tuesday, July 15, 2008

Do as we say...

In light of the near-collapse of U.S. mortgage giants Fannie Mae and Freddie Mac, it’s ironic to recall that the first report of the Administration’s Cuba commission included an offer to teach Cuba, among many other things, how to create a “secondary mortgage market system.”

The Cubans didn’t have much interest in that offer.

But if they were to look at our way of doing business, what they see might seem, well, socialistic.

Fannie Mae and Freddie Mac enjoy a unique government credit guarantee that gives them a leg up in the market and opportunities to earn huge profits. That’s why they are called “government-sponsored enterprises.” Now in trouble in spite of the advantage the government grants them, the U.S. Treasury and the Federal Reserve ride to their rescue. The idea of taking a risk and possibly failing – a pretty central element of capitalism – goes out the window, because these companies were too big to fail.

Then consider a recent World Bank report that estimates that biofuels have driven up world food prices by 75 percent. Here in our bastion of capitalism, the “market” for ethanol is artificial, sustained by subsidies to producers and a high tariff barrier that protects those producers from international competition. Americans pay in their tax bills, and at the grocery store.

No wonder we like to devise plans to reform Cuba’s economy. It’s easier than figuring out how to root out socialism at home.

3 comments:

leftside said...

You nailed this one Phil. It is not only Cuba we pushed our mortgage system on. This "innovation" is part of many structural adjustment and USAID programs exported to developing countries around the world.

The US shows it is willing to use socialism only to bail out large US corporations and help the rich. Cuba uses socialism to assure everyone has an affordable home over their heads. The US has 2 million vacant houses - about 2 for every homeless person in the country. We subsidize the rich person's housing far more than than the working class, with our insane mortgage deduction policy.... I'll contain myself.

Anonymous said...

Do as I say, not as I do.

Omar said...

Exactly, Socialism. This would be really enjoyable if it were not for the thousands of American families having a hard time with foreclosures.