Accounting Reform

As the crush of entitlement obligations worsens, this would be a very valuable message for the Right to begin trumpeting....

[O]riginally, [Fannie Mae] was a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.

The S&L bailout.  Enron.  Worldcom.  Arthur Anderson.  The subprime crisis. 

They are drops in the bucket compare to the debt being piled up by the federal government.  And yet, Congress allows the Federal Government to get away with accounting practices that would land a CEO in jail. 

Congress should be forced to abide by the rules that they apply to the accounting industry.  Nothing would tie down the politicians like a bit of accounting sunlight. 

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Whom do you suggest can force Congress...

...to change its spending ways and accept good accounting principles?

I will give you a hint: Don't expect the voting public to force Congress to change its binge-spending ways.  As long as they don't have to pay for it, it's free money to them.

So who is going to force Congress into making substantive spending changes?

Fiscal conservatives have been trying to do this for some thirty-odd years and we haven't even managed to slow the increase from increasing, let alone slow the spending rate down.

ex animo

davidfarrar  

No offense...

...but this is utopian 'good-government' nonsense.  The state is always going to abuse its financial privileges.  Such abuse is central to its nature and there is no solution to that.  The only preventive action open to us is keep the government out of the underwriting business.  Also, citizens should insist on prosecution.

There is one other way...

...bring the people back into the equation. If the people had to pay a federal sales tax every time they walk into a store and bought an item, they would be more attuned to Congress' spending habits, and more concerned about its accounting practices. It's not a perfect solution, but in a democracy, you have to start with the people.

ex animo

davidfarrar

You can buy Fannie Mae stock

.. and you can lose money owning it! ... it really is a private entity.

So was the heavy regulated and guaranteed monopoly AT&T from 1912 to 1983.

It is a better thing that these entities are private and regulated than simply part of Leviation Government like in Communism.

And yet, Congress allows the Federal Government to get away with accounting practices that would land a CEO in jail.

And Social Security is a Ponzi Scheme. This is not new. We have actuarial liabilities of tens of trillions in these systems, if you go by the promises the Congress has kited to the next generation. What is new is the moral hazard we are introducing to bailout after bailout. We are bailing out the country into bankruptcy .... IT HAS TO STOP.

I am not sure putting Fannie Mae debts on the US Govt books is the way to do it though.

 

Okay, it has to stop, that we all know. But how?

How do we stop it? We have been trying for thirty years to do just that.

Perhaps we should suggest this issue be placed on the GOP Platform 2008 website?However, I am pretty sure the GOP platform has pretty much coved this issue for the last twenty years or so. And besides, what actual weight does the GOP political plaform carry nowdays with presidential candidates, or even congressional candidates? I am sure no one expects John McCain to be bound by the GOP platform.

The only way I see to bring about change in this regard is to bring the people back into the tax, spend and borrow debate. But how do we do that?

ex animo

davidfarrar