Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (5617)	7/5/2001 10:50:31 AM
From: Ilaine	Read Replies (3) of 74559

Not crony capitalism exactly - these quasi-public quasi-private corporations are not capitalist, not communist, not socialist, not fascist - we need a new word. Fannie Mae can't fail because Uncle Sam guarantees all the mortgages that Fannie buys. Everyone who has a Fannie Mae mortgage (me, for example) pays lower interest than those who can't qualify, and those who have jumbo (non-conforming) loans. Fannie pays traditional mortgage companies to service the loans, which is where the money is. Everybody's happy. I'm sure there's a catch somewhere. The US has a lot of these types of hybrid corporations - the US Post Office is probably the first. The Federal Reserve is one. They seem to work. But conceptually, they are really not capitalist. Maybe we should call them state-owned monopolies. We figured out that running state monopolies using bureaucrats is not effective, so we let capitalists run them and make a profit, and they can still do it cheaper than bureaucrats. Something like that. The fact that Uncle Sam is always there, ready to pick up the pieces if something goes wrong does give them a bit of an unfair advantage, I'd say.

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