LaRouche: `The Fannie/Freddie Crisis Is the Collapse of the Greenspan Bubble'
July 11, 2008 (EIRNS)This release was issued yesterday by the Lyndon LaRouche Political Action Committee (LPAC).
The intensifying crisis of the government-backed mortgage enterprises Fannie Mae and Freddie Mac "signals the final collapse of the Greenspan bubble," economist and Democratic statesman Lyndon LaRouche commented today. "This is not a crisis of these two institutions," LaRouche emphasized. "It is the concentrated collapse of the entire globalized debt bubble Greenspan createdfalsely called the 'U.S. subprime mortgage bubble'falling onto these two institutions. And it signals that the next phase is the total explosion of entire financial system."
Fannie's and Freddie's huge mortgage-bundling and mortgage- securitization operations, with their resulting highly debt-leveraged condition, do not result from Fannie Mae's secondary mortgage function as defined by President Franklin Roosevelt's New Deal; rather, LaRouche insisted, these are the direct result of Fed Chairman Alan Greenspan's using these institutions in the creation of giant real estate-based debt bubbles from 1990 on. "Greenspan created this monster," LaRouche said. "This Greenspan monster is the problem today. The Greenspan debt-bubble monster, and the EU's Maastricht Treaty forced through by Margaret Thatcher's British government in 1990, are the keys to the current, worsening physical-economy breakdown in both Europe and the United States. The next phase is a total explosion of all the banks, the entire financial system."
Fannie and Freddie have been widely reported this week as "insolvent," threatened with bankruptcy collapse, and requiring a huge government bailout in the near future, as a result of taking on huge losses in the collapse of the mortgage bubble. Their stock market values have been driven down to 15-year lows, and their costs for borrowing have been driven up to more than 2% higher than Treasury securities, which is unprecedented. The two are handling over 80% of the secondary mortgage market in United States, all the other financial institutions in it having gone bankrupt or fled the mortgage markets.
"The policies I've proposed have to be enacted immediately now to prevent total financial collapse," LaRouche said, referring to his Homeowners and Bank Protection Act, proposed two-tier credit regulation of the U.S. economy, and emergency meetings among major nations to establish a New Bretton Woods, a modified return to the Bretton Woods monetary system principles put in place under FDR.