Did Palin really make a Fannie-Freddie "gaffe"?

"Palin Makes Her First Gaffe," the left-leaning Huffington Post reports tonight, arguing that Alaska Gov. Sarah Palin has made her first big mistake of the campaign, in a comment about the Fannie Mae and Freddie Mac bailout.

Here's the comment at issue: Over the weekend Palin said Fannie and Freddie had "gotten too big and too expensive to the taxpayers."

Gotcha, says HuffPost -- the bailout has yet to cost taxpayers anything! It's not expensive -- at least not yet! Palin's wrong! Blogger Sam Stein writes:

Economists and analysts pounced on the misstatement, which came before the government had spent funds bailing the two entities out, saying it demonstrated a lack of understanding about one of the key economic issues likely to face the next administration.

"You would like to think that someone who is going to be vice president and conceivable president would know what Fannie and Freddie do," said Dean Baker, co-director of the Center for Economic and Policy Research.

My take: The Palin comment is well within the margin of error on the campaign trail. There is no "gaffe" here. Congress earlier this summer -- in the housing bill that both John McCain and Barack Obama supported but didn't bother to vote on -- gave Treasury Secretary Henry M. Paulson Jr. a blank check* to invest in Fannie or Freddie. It OKd a big bailout. Perhaps in your book a blank check freshly signed by Congress is not "too expensive." Perhaps you trust the government not to spend a blank check. Perhaps pigs have wings. Palin was right: The very existence of a blank check means that Fannie and Freddie are too expensive to taxpayers.

*In a comforting bedtime story that several members of Congress actually believed, Paulson said the blank check was so big and powerful (a bazooka of cash!) he would never have to use it. By the time Palin spoke, it was clear that Paulson's attempt at "verbal intervention" had failed and that real taxpayer money will be spent to prop up Fannie and Freddie.  No one knows how much, but the Treasury has signed contracts to invest up to $100 billion in each company. Oh, and loan them money too. Oh, and buy their mortgage-backed securities. Do you really want to argue that she made a mistake by saying the two companies are "too big and too expensive to the taxpayers"?

Give her time, and a few one-on-one interviews. I'm certain she's as capable of the other three of a real screwup. This is not it.

-- Peter Viles

Your thoughts? Comments? E-mail story tips to Peter Viles

Photo Credit: Associated Press

Comments

[Rational Renter]

Peter, disagree with you: it is a gaffe. However, I agree that the magnitude of it is pretty minor, and it doesn't bother me personally.

[E]

Everything about the politicians trying to "solve" this crisis reminds me of watching "The Three Stooges" as a kid.

[manraygun]

Peter, stick to bloviating on the housing bubble. Frankly who cares about your political "takes"? There are too many "takes" on everything on the internet already, and you're just not that interesting -- which means we'll probably see you on CNN soon. Good grief.

[intheknow]

Peter, I agree with you. The biggest gaffe has already happened --while everyone was sleeping at the wheel.

Oh, and by the way --I find you interesting too!

[West Coast Indie]

I am not sure it was a "gaffe" at all my understanding of the 2 Freddies is they are able to buy and bundle morgates due to the government's promise to back their business and now we have to bail them out to the tune of $200 billion plus? Personally i think bailing them out is a mistake...if my local coffee shop over extends and goes bankrupt I seriously doubt the government is riding in to the rescue so what makes big business any different..granted it would hurt in the short run but in the long run maybe businesses will get smarter

[Laker]

"left-leaning Huffington Post reports..."
"...Sam Stein writes: You would like to think that someone who is going to be vice president and conceivable president would know what Fannie and Freddie do," said Dean Baker,...."

Today everybody knows what they do. They made fortune to their CEO and executives, they made tons of money to investors, bond holders, etc. But mainly their job today is to prop up the housing as much as possible and making it the most expensive it can..."

This Sam Stein is a Neo-liberal fool. His left wing propaganda will tell anything just to discredit Palin.
If Palin had said that 1+1 is 2. Then this Stupid fool Sam Stein would say that she is "very wrong" and made a big mistake... 1+1 is 4.....

For those left wing Neo-liberals, we should increase the taxes as much as possible, so that we can bail out all the fools, stupid, dumb, crooks, fraudsters, then raise the taxes even more. .
Oh,, and add some taxes to cover all the gains from this bailout.

[Nick]

That seems pretty reaching, even for an ultra-liberal, GOP-bashing site. You'd have to be pretty dense to not think a $200+ billion blank check injection into pseudo-nationalized companies which are technically bankrupt already (and have been creatively overstating their assets in addition) hasn't already cost the taxpayers money, in addition to the huge amount of money our current path will eventually cost the taxpayers. Not that I think the bloggers on those sites are all that bright to begin with, but that's a pretty big stretch into fantasy land, even for liberals.

If I were them, I'd wait for a real slip-up, so you don't end up looking like the farmer crying wolf when one inevitably comes. Then again, they're not all that bright, or patient, or long-term thinking generally speaking.

[LA-renter]

Typical... arguing over political nonsense...

More importantly, what exactly was Governor Palin's point? Without knowing better, it sounds like she was using folksy campaign-speak. If so, she's probably right.

Actually, I was peeved by Senator McCain's sound bite (repeated again and again on the radio news) that Treasurer Paulson's takeover of Fannie and Freddie was alright so long as "we're" not bailing out Wall Street investment bankers... (Either he's a moron or he thinks undecided voters are morons.) Who does McCain think is being saved by this action?

I was planning to vote for Obama because McCain's handling of foreign policy would be scary... Now his economic view is suspect too.

[Jim]

Rational Renter:

How the hell is it a gaffe? When you and I are out $200 billion dollars (which it will cost at a minimum -- probably more) I think you'll agree that Palin knows her stuff when it comes to GSEs.

[geokstr]

The left is, as usual, dead wrong, and probably on purpose too, as they wish to discredit Palin regardless of how low they have to stoop to do so. But what this also shows is that the reasoning of the far left is rooted in a totally different world view and mindset than those of us who inhabit the real world. It is a place where big governent is a good thing, and the bigger the better. So not only are they attacking Palin with this ludicrous comment, they are defending one of their own sacred shibboleths.

Fannie Mae and Freddie Mac are quasi-governmental organizations. They were established by governmental legislation to facilitate the broadest home ownership possible in the US, and in fact have mandates to do so. While ostensibly free market companies, they are in reality anything but.

They both have billions in guaranteed lines of credit from the government, they get preferential rates from the Fed, they pay NO taxes at either the state or federal level, and of course, have become too big to be allowed to fail, and now they are going to be WAY too expensive for the taxpayers.

And in the last twently years they have been the goose full of golden eggs for political hacks, almost all of whom are Democrats. Franklin Raines, former Clinton budget director, runs one of them, while Jamie Gorelick, another very controversial ex-member of the Clinton regime has a high position in the other.

All these people have huge annual bonus packages in the the tens of millions of dollars based on the profitability of the companies, and they were CAUGHTcooking the books in order to make it look like they made EXACTLY enough profit each year to trigger the bonuses. Raines has already had to give back millions of dollars, and is still under investigation.

But these monstrosities have powerful political backers, like Chuck Shumer and Barney Frank.

The National Taxpayers Union estimates that every American is now on the hook for $2,000 to pay for this little problem. Is that what these liberal "economists" mean when they say Palin made a gaffe here - what, because it's only $2,000 for each of us? I'm sure that they can afford that, but I don't want to pay it.

Here is a great article that details the sordid history of these socialism-gone-wild behemoths:
http://www.businessandmedia.org/printer/
2008/20080716164710.aspx

[Fourth Generation]

When someone running for national office is hiding and been covered out of public inquiry you can have pretty much everything said utterly scrutinized. This is the first thing Ms Palin had said of any significance in the national and public arena since her nomination and as such is been subjected to scrutiny. But what is a major gaffe is her "no show" to any questioning or interview. What politician running for office in less than 60 days keeps hiding from the public? Why is she been kept secret away? That is the greatest gaffe she has committed.

[Keith]

I think you're all missing the point. She shoots guns! Isn't that great? She has kids, and she shoots guns! Just like a man! And she's not too smart for her own good, like that Obama. She's not going to look down on us for having unplannned children, or pregnant teenagers, or belonging to wacko churches where people speak in tongues, or going to 6 colleges in 6 years. She shoots guns and she's just like us.

[PG]

The phrase "gotten too big and too expensive to the taxpayers" implies that Palin believes Freddie and Fannie to be federal government programs, like Medicare or Section 8 housing vouchers -- taxpayer-funded programs.

Of course, Fannie and Freddie actually are public corporations, traded on the New York Stock Exchange (though currently facing the threat of de-listing). The fact that the corporations originally were created by legislation does not make them any less of stockholder-owned, private sector entities.

Moreover, much like the S&L problems of the late 1980s and the Long Term Capital collapse of the late 1990s, the actual cause is not an excess of government intervention but a shortage of it. The Keating Five, of which McCain was one, were a scandal because they got huge contributions from S&L folks and in return kept federal regulators from questioning what they were doing with the money.

Had the government been properly regulating the financial industry, particularly in its use of derivatives and mortgage-backed securities, we would not be seeing a need to prop up Bear Stearns and now Fannie and Freddie. This is the same problem as at FEMA: with Republicans like Palin chanting that government needs to be smaller and do as little as possible, we now have agencies that are crippled from fulfilling their duties.

Either we have a totally unregulated market, and our savings can vanish from S&Ls that go broke with no recourse, or the government needs to keep an eye on the massive financial industry. This bizarre half-intervention, in which the financial industry can run amok until it finally crashes, only to be rescued by the federal government that had been asleep until then, is going to increase the national debt by another few trillion dollars.

[Karen]

ABC News expert on Monday night, a Columbia University professor considered an expert on FANNIE MAE, used those exact words -- TOO BIG and TOO EXPENSIVE to taxpayers.

[Karen]

Top recipients of Fannie/Freddie donations:

#1 Chris Dodd
#2 John Kerry
#3 Barack Obama
#4 HIllary Clinton

[Dewey]

The only gaffe was failure to call for an immediate jury trial of the organizations past and present adminstration. $200 billion fraud in wartime should result in life imprsionment if not hanging!

[norm]

What do you think the meaning of "had gotten" is. If I remember my English class that indicates it happened in the past. So did she realize that the entities had not been supported by tax dollars or didn't she realize it? That is the question. It does not matter that the government is now pouring tax dollars into Fannie and Freddie. That argument evades the point about her apparent lack of knowledge about Fannie and Freddie. Could her knowledge defecit be the reason she is not allowed to appear before the press, or do you think it is just her extreme positions on abortion, creationism, gender orientation, and religious war. By the way, can any of you Republicans tell me the difference between Sarah Palin believing that God has given us the task of fighting the war in Iraq, and Ahmadinijad believing that Allah has given him the task of jihad against Israel. Personally, I don't want a religious zealot, who thinks she is like a pit bull to be one heart beat away from the nuclear button. "Bomb, bomb, bomb, bomb, bomb Iran" McCain is scary enough, but at least he is not a religious whacko.

[Ron]

what's up with the "left-leaning" preface? I mean, if you are going to make this distinction then how come 95%-98% of what passes for news in this country isn't prefaced as "right-leaning" or "right-wing"? such as "right-leaning CNN today reports..." or "right-wing Forbes today reports...". might as well at least try and throw in some consistency.

[I Live in L.A., Too]

I saw this on CNN.com, too. The site singled the comment out, and I didn't understand why, as I completely agreed when she said it. They had gotten too big, and that's why we're bailing them out now. Besides, using qualifiers like "too big" and "too expensive" makes these opinions, not statements of fact, so I'm not sure how Sam can argue her opinion is a gaffe, even if he somehow disagrees.

[yours truly, Johnny Dollar]

Sarah is......"Atilla the hon-ey."

[Adam]

Of course it was a gaffe. The "blank check" story is irrelevant in this instance because said "blank check" was not used. *Now* it's being used.

[Henry Blankett]

This wasn't a "gaffe"; Palin simply had no idea what she was talking about. Notice that McCain actually applauds her ignorance (as does the crowd).

Pretty frightening stuff should these two get elected.

[Rational Renter]

It's a gaffe because the specific words she uses indicate that she thinks the taxpayers have been tied to the companies for a long time, when in reality we've only been tied to them for a few days.

"They have become too big for taxpayers." That was her quote. "Have become" are the key words here. As in, they got too big WHILE the taxpayers were responsible for them. Otherwise she would have said "They are too big for taxpayers."

Even if you want to mark the point in time when taxpayers got on the hook for the companies as a few months ago, when Paulson said they have a blank check if they need it (and this seems to be what many Palin-apologists are arguing), you cannot make the argument that Fannie and Freddie have grown too big since that point. In fact, they've shrunk since then. So again, the unhealthy growth that Palin is talking about happened before the taxpayers were responsible for their debts. And Palin's words suggest otherwise. They indicate that when the taxpayers first got involved, the companies were reasonably sized, but since then, they "have become" too big for taxpayers.

I can't believe I just parsed out her words that much. Especially considering I already said I don't consider this a big deal (especially compared to the innumerable gaffes McCain makes).

[Joe]

Election year - neither party can afford to have them fail, per Paulson's "The next admin can figure out what to do..". After the inaugeration, it will be called "100 days of hell", no matter who wins. Global recession, huge collapse of "paper valuations" as evidence of value, a return to fiscal responsability, all good long term. Republicans will help the lenders by bailing them out, Democrats will help the "people" by bailing out the lenders. Everybody loses. There is no such thing as an honest politician.

[sfvrealestate]

Guys, at one point this woman was interested in having books banned from a library. And then she tried to fire the librarian that wouldn't go along with it. Is that not a big enough "gaffe" for you? At least on par with her ignorance on Freddie and Fannie? Didn't we once fight a war against somebody else who tried to ban books? Um, I think his name was Hitler?