Fannie Mae and Freddie Mac Were Too Powerful To Regulate Taxpayers on hook for more than $400 billion

Former general counsel at the US Treasury Peter Wallison said that Fannie Mae and Freddie Mac were too powerful to regulate. The US Treasury is now going to provide unlimited support to these agencies for the next three years.  This is one solution to Mr. Geithner’s “Nunca Mas” policy to do whatever it takes to keep the big banks, GSE’s, and other too big to fails from failing ever again  from going back down the rabbit hole the US economy was in a year ago.

The government’s explicit guarantee to provide an unlimited backstop to Fannie and Freddie is also guaranteed to cost taxpayers more than $400 billion dollars.

Now, what taxpayers ought to pay attention to is Wallison’s admission that Fannie and Freddie were too powerful to regulate. The same admission could be said about all entities “deemed” to be too big to fail. They are all too powerful to regulate. Yet, they are backstopped with Mr. Geithner’s “Nunca Mas” policy. This is the government’s guarantee to do whatever it takes to keep the Too Big to Fail banks from ever failing again.

Too Big to Fail yet  Too Big to Regulate. Hmmm, if Wallison gets it that these entities are too powerful to regulate, do you think lawmakers might also come around to this realization soon? The prospect for such an epiphany dawning on Capitol Hill is an incredible longshot as we close out 2009.