2010 elections

Last week, just before Christmas, the Obama Administration quietly increased the amount of losses it would cover at Fannie Mae and Freddie Mac -- the two Federally-chartered (and now controlled) securitizers of home mortgages -- from a combined $400 billion to infinity. I'm going to look at this move in two parts, first considering the political considerations then the economic ones.

"All politics is local, " said the late Tip O'Neill when he was Speaker of the House. If Tip was right, and it is easy to argue that he was, then there is a local political basis for this action by the Obama Administration. Political pundits (the worst kind) are tending to see it as a shifty move by the President against Congress, but I tend to see it as a shifty move by the President for Congress -- at least for Democrats in the House and Senate.

The original Bush-era deal to take Fannie and Freddie under conservatorship allowed the White House to modify the deal without further Congressional approval until the end of 2009. So this week, expanding the amount of losses covered by the Feds requires nothing but a signature. Next week, it would require literally an Act of Congress.