Tales from Bailout Nation Pt. XXV

The hits, they just keep on coming...

Freddie Mac, the second-largest US mortgage finance company, said on Wednesday it would need an additional $10.6bn from the US Treasury Department to staunch losses on bad loans.

The company said it had lost $8bn, or $2.45 per share, in the first three months of 2010. The amount includes a $1.3bn dividend payment to the Treasury Department on senior preferred stock issued as part of a 2008 government-led bail-out. Along with larger rival Fannie Mae, Freddie is propping up the housing market by purchasing mortgages in the secondary market.

Since September 2008, both Fannie and Freddie have been operating under a legal framework known as conservatorship. Together they have eaten up $136bn in taxpayer money. The final bill could be much higher. The government has pledged to provide unlimited support to the companies over the next three years. The Congressional Budget Office estimates that taxpayer aid could approach $400bn over the next decade, making the bail-out of Fannie Mae and Freddie Mac far more costly than the rescue of big Wall Street banks.

In spite of government-led efforts to modify mortgages, foreclosures continue to mount. As a result, Freddie Mac said writedowns on uncollectible loans on single-family residences had totalled $2.8bn in the period, compared with $2.4bn in the fourth quarter of 2009. Delinquencies on those residences rose slightly to 4.13 per cent as of March 31, compared with 3.98 per cent as of December 31.

(italics, ours)

Gee, do you think perhaps that it's precisely because of government-led efforts we're still in this mess? Precisely, how is enticing bad risks to stay in bad loans good for the housing market?

Of course, don't expect the Feds to change course because as they are spending your money, there is absolutely no incentive to step back and take a look at this in a rational manner and possibly come to the conclusion that their actions are simply exacerbating the situation.

As the article states (and as we covered the Christmas Eve Dump), the federal government is all in with respect to bailing out Fannie and Freddie and they will continue to dump money into both ad infinitum, ad nauseum.


Exit question: For two entities which will collectively cost us more than the eeeeevil Wall St. financial firms, where is the outrage from Congress or this administration?

No sleeping on this guy

Op-ed piece in today’s San Diego Union-Tribune gives some of the conventional wisdom regarding immigration reform with respect to both political parties. The CW held that two years ago when the immigration reform was last debated in Congress, Democrats weren’t sufficiently devoted to the cause and were merely content to use it as a wedge issue against the Republicans. Fair enough.

Fast forward, though, to just a couple of weeks ago when House Speaker, Nancy Pelosi reportedly told members of her Party that she was not going to act on any immigration legislation until the Senate took it up first. This leaves recently-introduced legislation from Luis Gutierrez (D-Ill.) in the lurch, thus shielding vulnerable freshman Democrats from this controversial issue.

The Op-ed fails to note that, given this series of events, whatever wedge issue may exist for the Republicans exists also for the Democrats. And doesn’t that speak to the general horribleness of all the legislation regarding immigration “reform” of recent vintage that the issue is a complete loser with the voting public for both parties? We can't recall, in our lifetime, a piece of legislation that was as opposed across such a wide-range of the political spectrum of the voting public.

No matter how much of a loser it may be, immigration reform (see also: Amnesty) is the Freddie Kruger of American politics – everytime you think you have killed it, it just keeps coming back. And just because the deliberative nature of the Senate makes it unlikely that immigration reform will gain any traction in the upcoming election year, don't expect it to really fade away any time soon.

Like some bad dreams, this thing never fails to deliver

We’re not quite at the level of bureaucratization and nationalization that Europe and Canada are with respect to health care but we are already experiencing the same phenomena: a shortage of primary care physicians.

Obama administration officials, alarmed at doctor shortages, are looking for ways to increase the supply of physicians to meet the needs of an aging population and millions of uninsured people who would gain coverage under legislation championed by the president.

The officials said they were particularly concerned about shortages of primary care providers who are the main source of health care for most Americans.

(Quick aside: That last paragraph is symptomatic of the pratfall of nationalized health care… the belief that once everyone is insured, everything will be just peachy, health-wise, for everybody. Primary care providers are not the main source of health care for Americans… Americans are the main source of health care for Americans. If you are counting on your GP to keep you healthy then you are probably not leading a healthy life-style).

One proposal being discussed is to increase Medicare payments to GPs at the expense of high-paid specialists, which of course, does not please the specialists and has touched off a lobbying fracas.

Another is to simply increase the number of GPs – no small feat considering the cost of medical school. And still another is to vet greater participation of nurse practitioners and physician assistants. It’d be like going to see the doctor, except you wouldn’t see an actual doctor. That’s comforting.

So any way you shake it, increasing the number of GPs will cost more money. Now, that sounds entirely reasonable except that…. it’s all supposed to be free!

And dig this for a microcosm of socialized medicine:

The experience of Massachusetts is instructive. Under a far-reaching 2006 law, the state succeeded in reducing the number of uninsured. But many who gained coverage have been struggling to find primary care doctors, and the average waiting time for routine office visits has increased.

The ratio of primary care doctors to population is higher in Massachusetts than in other states.

That is not a misprint. Only in the Bizarro World that is socialized medicine can one have more doctors with less service.

Unfortunately, the linked article from the NYT never gets around to discussing the root cause of this phenomena which is the disconnect between price and cost.

The price of health care which is pre-negotiated by (non-vested) third parties in a socialized system will not reflect the cost of that health care that is provided. That is why you have the illusory effect of seemingly more doctors but crappier service. The doctors simply will not offer specific services if those services aren’t being properly compensated.

Time after time after time… it’s an ironclad stone-cold lock: the corresponding degrees by which you nationalize health care will result in actual higher costs and poorer service by the same corresponding degrees.

Like the dude pictured above, the disastrous consequences of socialized medicine are inescapable.