A Confusing Comment on Fannie & Freddie From Gov. Sarah Palin

Saturday in Colorado Springs, Colo., Alaska Gov. Sarah Palin said, "The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

"Too expensive to the taxpayers?"

They're private entities.

Though they're private entities ultimately backed up by the taxpayers.

But the only way Fannie and Freddie are "too expensive to the taxpayers" is if you're talking about the bailout announced over the weekend.

Is that what she meant?

So, does "too expensive" mean that Palin opposes the bailout?

Or did she misstate how these entities function?

I asked the McCain-Palin campaign for an explanation.

Its response was to send an e-mail from domestic policy adviser Doug Holtz-Eakin:

“John McCain supports the steps needed to keep the financial troubles at Fannie Mae and Freddie Mac from further squeezing American families, and endorses the idea that management and shareholders should not benefit from government backing," Holz-Eakin said. "While details are not yet available, the actions taken today are consistent with those objectives. Fannie and Freddie have been the poster children for a lack of transparency and accountability, and remind us of the needed reforms to financial markets in general. We need to create jobs and get the economy going — and get way from the practice of sticking Main Street Americans with these bills. If elected, John McCain will continue his crusade for the right reform of the institutions. Sen. McCain will get real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government.”


That doesn't really answer my question.

A McCain aide e-mails on background that Fannie and Freddie "have $5 trillion in exposure. They either own or insure this much in loans, as such, they are too big a part of the economy to be allowed to fail. Their failure would pose a systemic risk to the economy, which is why treasury is stepping in, and has committed billions in taxpayers to keep them afloat. They are too big, and now, too expensive."

So -- according to this aide, speaking on background -- Palin meant they are CURRENTLY too expensive, though presumably she supports the Bush administration's bailout.

What do you think? You buy that explanation?

- jpt

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