Suresh
Joined: 16 Sep 2005
Posts: 8391
Location: Maryland
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Subject: Including Fannie and Freddie, national debt held by public is up to $14.2T
 Posted: Fri Feb 05, 2010 2:22 pm |
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Bloomberg: Obama’s $6.3 Trillion Scam Is America’s Shame: Jonathan Weil
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Whether on Wall Street or in Washington, the biggest frauds often are the perfectly legal ones hidden in broad daylight. And in terms of dollars, it would be hard to top the accounting scam that Obama’s budget wonks are trying to pull off now.
The ploy here is simple. They are keeping Fannie Mae and Freddie Mac off the government’s balance sheet and out of the federal budget, along with their $1.6 trillion of corporate debt and $4.7 trillion of mortgage obligations.
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The White House is already forecasting a $1.3 trillion budget deficit for 2011, which is about $3 of spending for every $2 of government receipts. By all outward appearances, it seems Obama and his budget wizards decided that including the liabilities at Fannie and Freddie would be too much reality for the world to handle. So they left the companies out, in a trick worthy of Enron’s playbook, except not quite so hidden.
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Obama’s White House didn’t invent this kind of fudging. President George W. Bush, for example, kept most war costs out of the budget. Obama’s proposal shows about $289 billion of war costs for 2010 and 2011, plus a $50 billion placeholder estimate for each year after that. Those dollars are small compared with the numbers at Fannie and Freddie, though.
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Excluding Fannie and Freddie, the national debt held by the public is about $7.9 trillion. With them, it exceeds last year’s $13.2 trillion gross domestic product.
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Former SEC Chairman Arthur Levitt echoed Mr. Weil's concerns in an interview on Bloomberg Radio.
| Quote: | TOM KEENE, HOST, 'BLOOMBERG SURVEILLANCE': Right now, Arthur Levitt, Policy Advisor, Goldman Sachs, Bloomberg LP Board Member, Former Chairman of the SEC.
Jonathan Weil out with a commentary this morning on the Bloobmerg of a $6.3 trillion essentially off balance sheet transaction. Should Fannie and Freddy be on the balance sheet? Should they be visible to the taxpayers?
ARTHUR LEVITT, POLICY ADVISOR, GOLDMAN SACHS: Absolutely. It's an incredible article. He's absolutely right. Fannie and Freddie belong on the balance sheet if we're in an era of transparency.
The White House is already forecasting $1.3 trillion budget deficit for 2011, which is about $3 of spending for every $2 of government receipts. Fannie and Freddie are wards of the State. Orszag already promised that that's where they should be. And he's not putting it there. Shades of Enron. |
Now, it should be noted that Fannie and Freddie's $6.3 trillion figure is a potential liability figure. If I'm not mistaken, for the full $6.3 trillion to be added to the national debt, Fannie and Freddie would have to take 100% losses on all of that debt. It seems unlikely that everyone in America is going to default on all of their corporate and mortgage debt.
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Suresh
Please feel free to agree with or critique the article excerpts and our comments. Also, please post excerpts from current articles that you've read and which may help all of us get a more complete macroeconomic big picture. |
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