Journolistas got it bassackwards on Fannie, Freddie, and Sarah Palin

*
The Daily Caller has released yet another batch of Journolist emails in which the Journolistas discuss Gov. Palin's remark that "Fannie Mae and Freddie Mac had gotten too big and too expensive to the taxpayers." Although McClatchy newspapers reported, along with the governor's comment, that the two "Non-Governmental Agencies" (NGOs) "aren’t taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization.”

There was indeed a taxpayer bailout, as Judicial Watch explains:

On September 7, 2008, in a joint press conference with former FHFA Director Jim Lockhart, then-Treasury Secretary Henry "Hank" Paulson announced that after examining "all options available," Fannie Mae and Freddie Mac would be placed under "conservatorship" by the federal government. "Based on what we have learned about these institutions over the last four weeks -- including what we learned about their capital requirements -- and given the condition of financial markets today, I concluded that it would not have been in the best interest of the taxpayers for Treasury to simply make an equity investment in these enterprises in their current form," Paulson said. Lockhart expressed support for the Treasury Secretary's decision, indicating that he told the Treasury Secretary "conservatorship was the only form in which I would commit taxpayer money to [Fannie and Freddie]."

To date, there has been little information released regarding the internal assessments used by federal officials to justify the takeovers. For example, nothing has been detailed regarding why the option of conservatorship was chosen over another option under law: placement of Fannie Mae and Freddie Mac into receivership, a form of outright liquidation. Meanwhile, taxpayers have "invested" $145 billion dollars in Fannie and Freddie so far, with some analysts estimating the total cost could ultimately be hundreds of billions of dollars higher. The FHFA requested additional funding for Fannie and Freddie in its recent report to Congress. Last December, the Obama administration pledged an unlimited amount of taxpayer dollars to keep Fannie and Freddie afloat, a commitment that was formerly capped at $400 billion.

Notice that the announcement of the takeover was made on September 7, 2008, the day before this thread on Journolist started. But a likely federal bailout of the two NGOs had been a topic of national discussion for months prior to the announcement that it was a done deal. As liberal columnist Paul Krugman wrote in the New York Times on July 14, 2008:

"Fannie and Freddie probably will need a government rescue."

That same day economics professor Willem Buiter complained, on his Financial Times blog:

"The bail-out of Fannie Mae and Freddie Mac by the combined forces of the US Treasury and the Federal Reserve Board is the ugliest exercise of its kind I have ever observed outside early transition economies and mature banana republics."

More than a month earlier, in a Bloomberg analysis by Lorraine Woellert and John Gittelsohn, the authors predicted:

"The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history."

We see that a federal bailout using taxpayer money has been a hot topic for more than two months before Gov. Palin was even announced as McCain's running mate on August 29 of that year. Thus her remark that Fannie and Freddie had been too expensive for the taxpayers. was both correct and justified. Contrary to the Journolista's claims, the governor's statement on the NGOs was neither a gaffe nor a miscue. And contrary to 'Lister Adam Doster's sneer that her comment "just shows her policy vapidness," she actually showed that she was right on top of the issue and prescient about the likely outcome. Doster's remark, on the other hand, shows typical leftist hubris.

The complete document containing raw Journolist emails on Governor Palin's remark about Fannie Mac and Freddie Mae are here.

- JP