Fannie Mae and Freddie Mac, two of the country’s largest mortgage companies, are together, $5.3 trillion in debt. They made headlines when their stock tumbled to one-half its value amid fears they would not survive rising mortgage defaults. Congress is now debating a taxpayer bail out to the tune of $25 billion, and an open line of credit for the companies. There is speculation that the companies will eventually be nationalized, i.e. taken over and put under government ownership or control. If the U.S. ever had to take on the full debt of these companies, the U.S. public debt, which already exceeds $9.4 trillion, would almost double at a stroke.
A chorus of appeals to reign in the two monster companies circulated
for years. Government officials turned a blind eye to their
questionable accounting errors of around $5.5 billion. A politician
trying to look into their books was told to stop holding hearings. “Fan
and Fred have been protected by an alliance of Capital Hill and Wall
Street,” says Paul A. Gigot of the Wall Street Journal. “They
have been able to purchase political immunity by disguising [their]
vast profit-making machine in the cloak of ‘affordable housing.’
What’s behind the “rescue” plan is fear that the collapse of these
companies will threaten the stability of the global economy — and
ultimately the capitalist system itself. The U.S. relies on borrowed
money to keep the economy functioning. Asia, Europe and Russia have
hundreds of billions of dollars invested in Fannie and Freddie. The
U.S. fears that investors will perceive that their money is unsafe,
spurring a global selling spree of these securities, with all of the
dire consequences. Yet the U.S. capitalists are between a rock
and a hard place. They could raise interest rates to encourage bond
sales. But this would spur inflation. One thing is clear: while
millions of families suffer foreclosures and join the ranks of the
already homeless, our tax dollars are going to the corporations.
We must get at the root cause of the economic crisis or we will
continue to be subject to the capitalist’s “solutions.” Today, robots
and computers are eliminating human labor, the source of all wealth
under capitalism. Thus we see mountains of wealth evaporating while the
value of human life, as evidenced by the sheer number of people living
in the streets, is driven to zero. The bottom line is that workers are
steadily losing their jobs to new technology. With little or no money,
workers cannot consume what the robots produce. This destroys the
market for what is produced, and the market economy begins to collapse.
We can’t continue to have a market economy when there is no market.
Under these conditions, only a cooperative economy will allow people to
survive. Replacing the capitalist system with a new society based on a
cooperative economy is the only way out.
If we continue to follow capitalist leadership we are headed for war
and fascism. Ultimately, war is the way they will attempt to
resolve the crisis. We, the people, must fight for a new society where
the marvelous technology is used to guarantee that everyone has the
necessities of life. Such a society enlists the social contribution of
everyone. It is a world worth fighting for.
What can we do right now? Eventually the government will be forced to
nationalize the big financial institutions to attempt to stabilize the
economy. This provides opportunities to force the government to
nationalize them in the public’s interests rather than in the interests
of the corporations. Ultimately, society must take over these giant
corporations. It is the only way a new society can be built.