Since the vast majority of my blog readers are publik school graduates, I’m sure you are unaware of the accounting fraud that was Enron.
Enron liked to buy up commercial properties around its energy plants using “special purpose vehicles,” which is a type of investment that allowed Enron to (fraudulently) keep its real debt off its balance sheets.
This made Enron look like a completely solvent company on paper, while in reality the entire operation was flooded in debt. Enron took bets that its investments would generate value in the long term, but when this failed to materialize, the entire fraud came unglued at the seams.
Enter Fannie Mae and Freddie Mac
These two criminally owned corporations are “quasi-governmental” meaning they are just like the fascist Federal Reserve, IRS, and student loan providers. They are private corporations that make private profits but redistribute losses to the tax payer. In fact, basically all of the major financial firms on Wall Street could be considered quasi-governmental because they all do this; except Fannie and Freddie do this with open permission instead of back-room deals after a major loss occurs.
The criminal institution you call a federal government has decided to take accounting tips from Enron in order to deal with the sub-prime meltdown that landed in Fannie and Freddie’s lap.
The criminal government is claiming that the 5 trillion dollars of worthless sub-prime debt being held by Fannie and Freddie is actually not really debt at all! In fact, the criminal government is claiming exactly what Enron claimed. That its “investments” actually have value and that there is no need to put them on the books because they aren’t actually worthless paper.
Of course, anyone with more than 2 brain cells knows this is a flying load of crap (even the government itself!). Yet still they persist in claiming that there is no need for this 5 trillion dollars of sub-prime debt to be put on the governments official balance sheets.
Washington’s Blog fills us in:
Putting Fannie and Freddie on the national books would in an instant increase the national debt held by the public by 75%—to $12.7 trillion, from $7.3 trillion today. The nearby chart shows that this takes debt as a share of GDP to nearly 90%, or nearly double the peak it reached in the 1980s when the political class was hyperventilating even as the Reagan deficits were falling as a share of GDP. Congress would have to add that $5.4 trillion to the increase in the federal debt limit that Treasury Secretary Timothy Geithner is now requesting. But that would be truth-in-budgeting. Wall Street has sold Fannie paper to the world as if it were as taxpayer guaranteed as Treasury bills, and now we know it is…
The danger is that the federal government will itself become the next Enron, with its biggest liabilities hidden from view, officially denied or tucked away in special purpose vehicles like Fannie Mae. Until the next crisis hits.
In the mean time, government is running the worlds two largest Ponzi schemes under the guise of Socialist Security and Medicare. These two criminal frauds are absolutely no different than what Bernie Madoff was operating.
Madoff is actually in prison because he attempted to muscle in on the government’s Ponzi monopoly. Only government is allowed to rip people off to the tune of billions (now trillions), hence Madoff had to pay the price.
Of course the real losers are the American publik, who will end up paying trillions in hard earned sweat and labor to criminal bankers and politicians as they toil in the new progressive slave state of hope and change.