Obama on Fannie Mae
September 3, 2008;
Review & Outlook secion of the WSJ: Page A22
First John McCain called for ending the private profit and public risk business model of Fannie Mae and Freddie Mac. And now Barack Obama has weighed in with his own critique of the taxpayer bailout for the two government-sponsored mortgage giants.
"Long term, what we have to do is go ahead and make a decision," Mr. Obama said last week in Davenport, Iowa, in response to a question. "If these are public entities, then they have to get out of the profit-making business, and if they are private entities, then we don't bail them out." Sounds like former Federal Reserve Chairman Paul Volcker and former Treasury Secretary Larry Summers have been talking to the Illinois Senator.
Mr. Obama added a note of populism, saying he had "no sympathy" for Fannie and Freddie CEOs, and that "investors who had made a killing" shouldn't be bailed out. Maybe he can whisper that to current Treasury chief Hank Paulson, who keeps saying he wants to preserve the companies in their "current form," despite the manifest failures of that form.
The Democratic nominee for President hasn't gone as far as Mr. McCain, who has pledged to change the Fan and Fred business models. But at least Mr. Obama is moving away from the slavish support for the companies that typifies Democrats in Congress. No doubt Barney Frank and Chuck Schumer are reassuring Fan and Fred that this is merely a campaign riff that won't last past November. But maybe, just maybe, Fannie Mae's political invincibility is starting to crack.
