The Blog @ Spolitics

HuffPo Desperately Seeking A Palin Gaffe

HuffPo’s Sam Stein thinks he found Governor Palin’s first gaffe:

Gov. Sarah Palin made her first potentially major gaffe during her time on the national scene while discussing the developments of the perilous housing market this past weekend.

Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had “gotten too big and too expensive to the taxpayers.” The companies, as McClatchy reported, “aren’t taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization.”

Stein quotes a couple of economists from liberal think tanks to try to back up the assertion that this is a serious mistake, insinuating it means Palin doesn’t know anything about either Fannie or Freddie. (Wait, I thought she just read her speeches?)

First off, yes these are not government agencies, but since we’re nitpicking here, they’re not “private” either. They are publicly traded companies. Second, they are GSE’s — Government Sponsored Entities and, as such, their debt has the implicit guarantee of the Federal government, which means the taxpayer assumes their risk. Risk does carry a price — the bond markets depends on this fact. And it is fair to say — regardless of what liberal economists may think — that the risk Freddie and Fannie pose to the American taxpayer is “too expensive” — especially at a time when the Federal government was talking about bailing them out within a matter of days.

Oddly, perhaps not understanding that it undermines his criticism, Stein includes this quote from Gerald P. O’Driscoll, an economist with the Cato Institute: “[Fannie and Freddie] were not taxpayer funded. They had taxpayer guarantee, which is worth something, especially in the stock market…”

Well, if the taxpayer guarantee is “worth something,” who finances that value? The taxpayer of course.

Stein’s the one who doesn’t get it. His argument is kind of like saying the person who co-signs a home loan shouldn’t be worried about how expensive the house is as long as they’re not making the payments. If the debt is too large for the co-signer to pay-off, then of course it’s too expensive for them.

Furthermore, Stein’s whole argument relies on the fact that Palin actually made this statement before the government intervention occurred, even though it was imminent. In other words, Stein swings and misses here.