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Saturday, December 10, 2011

Gingrich's Freddie Problem

Timothy Birdnow

Newt Gingrich was in bed with Freddie Mac - and spoke glowingly about it and other GSE's.

From an article in Cafe Hayek:

"There are many things that are frightening about Gingrich’s remarks. First, they are for Freddie Mac who paid him something around $1.6 million for his “services.” He described this work originally as being payment for his historical knowledge of housing. Cue laughter, folks. This interview gives you a glimpse of the real reason he was hired. He was hired, of course, to provide cover for Freddie Mac. Freddie Mac was a GSE, a government-sponsored enterprise. A GSE was quasi-private or quasi-public, take your pick. Freddie (and Fannie Mae) bought mortgages from originators and brokers. They provided “liquidity” for the housing market which is a fancy way of saying that they increased the amount of credit available. For a long while, they were relatively benign."

End excerpt.

And Gingrich made the following remarks in an interview about Freddie "Corleone" Mac:

Q: A key element of the entrepreneurial model is using the private sector where possible to save taxpayer dollars and improve efficiency. And you believe the GSE model provides one way to use the private sector.

Gingrich: Some activities of government – trash collection is a good example – can be efficiently contracted out to the private sector. Other functions – the military, police and fire protection – obviously must remain within government. And then there are areas in which a public purpose would be best achieved by using market-based models. I think GSEs provide one of those models. I like the GSE model because it provides a more efficient, market-based alternative to taxpayer-funded government programs. It marries private enterprise to a public purpose. We obviously don’t want to use GSEs for everything, but there are times when private enterprise alone is not sufficient to achieve a public purpose. I think private enterprise alone is not going to be able to help the Gulf region recover from the hurricanes, and government will not get the job done in a very effective or efficient manner. We should be looking seriously at creating a GSE to help redevelop this region. We should be looking at whether and how the GSE model could help us address the problem of financing health care. I think a GSE for space exploration ought to be seriously considered – I’m convinced that if NASA were a GSE, we probably would be on Mars today.

End excerpt.

This bespeaks a Big Government conservative - a man who believes in Progressive ideals but wants government to empower intermediaries rather than do the job itself. And don't think that the Obama Administration won't use this against Gingrich in the general election. Their convenient amnesia, their forgetting that Barney Frank was a huge player in this, will disappear as the esteemed Mr. Frank is retiring and they are now free to tar the GOP with the housing meltdown even further.

Frankly, we don't need a marrige made in hell like that of government with quasi-private entitites. There is a word for that; it's called Fascism. If Gingrich sees that as a useful or good thing then he is not the man to lead America back from the precipice it currently clings upon. We need someone who believes government is a fearful master, one to be reduced.

According to the Concise Encyclopedia of Economics:

"Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically. In doing all this, fascism denatured the marketplace. Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions.


Fascism embodied corporatism, in which political representation was based on trade and industry rather than on geography. In this, fascism revealed its roots in syndicalism, a form of socialism originating on the left. The government cartelized firms of the same industry, with representatives of labor and management serving on myriad local, regional, and national boards—subject always to the final authority of the dictator’s economic plan. Corporatism was intended to avert unsettling divisions within the nation, such as lockouts and union strikes. The price of such forced “harmony” was the loss of the ability to bargain and move about freely."

End excerpts.

Indeed, the Obama Administration is clearly Fascist in economic policy - as the rest of the entry makes abundantly clear. While Gingrich may stop short of outright Fascist economic theory, he is still happy with a type of corporatism more at home in twentieth century Europe than America.

We do not need a choice between fast and slow suicide. It's time to get back to first principles and away from experimentalist governance.

If Gingrich is the nominee he will have much to answer for.

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