Investor Jim Rogers, CEO of Rogers Holdings, incredibly, told CNBC Europe on Monday that the nationalization of Fannie Mae and Freddie Mac shows that:
America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it’s just bailing out financial institutions
…This is madness, this is insanity, they have more than doubled the American national debt in one weekend…
He appears to be an expert investor in China, but he ignores the consequences everyone would feel if Fannie and Freddie went bust. As the Economist points out:
If you cannot let firms fail in a bust, then you must contain them in the boom. That helps explain why the investment banks now need more supervision; why financial firms should have to hold more capital as a boom gathers pace; and why monetary policy should lean against rising asset prices. Regulation is necessary, but beware the state being seduced into taking on duties it cannot possibly carry out well. As Fannie and Freddie show, regulators are easily captured and outwitted. The best controls are transparency and competition. When possible the government needs to stand back. Sadly, it failed to do so in the American mortgage market.
Transparency and competition: let’s not allow ourselves to be caught like this again.