Sununu Against Auto Bailout

In the morning's Union Leader, our outgoing Senator nails why the currently proposed bailout in an awful idea:

It is simply not the role or the responsibility of government to provide subsidies, support or special benefits to specific businesses. Using government funds for such purposes is unfair to taxpayers, especially those working for businesses that are left out. Instead, the government's role should be to create the best possible environment for investment, job creation and economic growth, and then to let businesses compete for customers on a level playing field.

Government subsidies for the auto manufacturers or any other business also create a moral hazard -- the significant risk that bad behavior and investments will only be encouraged in the future. We have seen the very real implications of moral hazard in the spectacular failures of Fannie Mae and Freddie Mac.

Senator Sununu's support of the Wall Street bailout package was both bad policy and bad politics, though not enough to have changed the outcome of his race. Glad to see he's making such a clear case against this latest incarnation.

Fanning the Flames at Fannie

Gee, let's help people buy homes. What a great idea:

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

However, this might not work out well:

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

This is from the New York Times, in 1999.

John Sununu has been warning that mismanagement and social engineering at Fannie Mae could have disastrous results on the American economy. John Sununu was right.