AUSTIN, Texas -- Freddie Mac and Fannie Mae have gone and gotten themselves in big trouble. For those of you who do not follow the business pages, I only wish we were talking about pregnant teen-agers. Fannie and Freddie are the two government-sponsored mortgage companies that help most of us buy homes. Trouble is, they've run themselves into big-time debt -- they've doubled the amount they owe in just the last five years. When I say big-time, try $2 trillion. And guess who's on the hook if these things go under? Congratulations, taxpayers.

            This week, Alan Greenspan, the Great Pooh-Bah of the financial world, opined in his usual Delphic style before the Senate Banking Committee, "To fend off possible future systemic difficulties, which we assess as likely if the expansion continues unabated, preventive actions are required sooner rather than later." The Wall Street Journal helpfully translates this as, "Act quickly." Hard to tell with Greenspan: I yield to the Journal's long experience in Greenspan translation, but it could also mean, "Push the panic button now!"

            What we have here is the same thing that happened after the famous S&L deregulation in the 1980s -- privatized profit and socialized risk. You may recall that little adventure in deregulation -- the universal panacea according to the right -- cost the taxpayers half a trillion dollars.

            Fannie and Freddie were created by Congress as private companies to encourage home ownership and -- in theory, on paper -- the taxpayers aren't responsible if they go bust ... but they're literally too big to fail. Unfortunately, the markets have always assumed Fannie and Freddie's debt was guaranteed by the U.S. government. Should they go under and the government not pay, it would be as though the United States government were defaulting on a sort of low-level debt. All that would do is cause financial collapse and chaos and probably worldwide depression, but try not to think about it too long.

            On the other hand, the people responsible for all this have already been thinking about it too long. For over a year now, Fannie and Freddie's pickle has been obvious, and the experts on the financial pages have been writing, "Do Something," for ages.

            The fiscal irresponsibility of this so-called CEO-administration is a source of constant wonder. This potential financial crisis is racing toward us like a tidal wave, gaining strength as it comes. Are they actually going to stand there like Alfred E. Neuman, saying, "What, me worry?"

            Of course, the conservatives think the thing to do is privatize the companies, and the liberals think the thing to do is regulate them. I don't see where privatizing gets us any further. Oh, to be sure, in the long run, market discipline would work like a charm, but one reason I'm a Keynesian is the old boy's observation, "In the long run, we'll all be dead." And dead-broke, too, if these things default.  

            Seems to me Fannie and Freddie's mess is the perfect argument FOR government regulation, and not just of the two giant mortgage companies. These GSE's (gobbledygook for "government-sponsored entities") have been hedging their debt risks through hedge funds, which are in turn almost entirely unregulated. Greenspan warns that Fannie and Freddie's debt could soon be larger than the federal government's. Think about it. Remember what happened when one large hedge fund, Long-Term Capital Management, started to go under? Ooops.

            You know, when a bleeding heart liberal like me has to sit around lecturing a Republican administration on fiscal responsibility, we're in a sorry pass. I watch the entire corporate and financial structure of this country running around raising money like crazy for the re-election of George W. Bush, and I am reminded once more that capitalism will destroy itself if you let it.

            Congress has already failed in its oversight responsibilities by letting the companies get into this mess. The Center for Responsive Politics reports Fannie and Freddie contributed $6.5 million to federal campaigns in 2002. Fannie has hired 14 lobbying firms, and Freddie 26. They spent $9.7 million on lobbying in the first six months of last year. According to Ralph Nader (always a reliable source in these matters, no matter what his political judgment), "The board of directors on staff of Fannie and Freddie have always been populated by former officials and political activists from both the Republican and Democratic parties who are given huge pay packages."

            The Bushies want to put regulation of the GSEs in the Treasury Department and abolish the Office of Federal Housing Enterprise Oversight, the independent agency whose sole responsibility is monitoring the GSEs. Moving regulation to Treasury would make the GSEs even more political and even more apparently creatures of government. In typical Republican fashion, the small agency now handling the job has been starved for funds.

            This is the great Gingrich ploy -- don't give a regulatory agency enough money to do its job, and then when things come unstuck, announce that regulation doesn't work.

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