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"The US government takeover of the GSEs......makes the US the most socialist system in the world, outside of places like North Korea and Cuba. It will have 75% of its current housing finance and the majority of its remaining capital allocation being financed with credit that is directly and indirectly the result of government and Fed intervention," according to Independent Strategy.
Thanks to our friends over at Independent Strategy for their provocative analysis this morning. The point has also not been lost on the French leader writers who (according to our Paris correspondent, Stephane Pedrazzi) noted in morning editions of La Tribune and Les Echos the irony of the situation.
US politicians have enjoyed pointing to the 'anti-capitalist' bailouts of Credit Lyonnais and most recently Alstom by the French government as signs of weakness; evidence of a morally corrupt political system that was unprepared to let businesses go through the natural process of failure and rebirth that strengthens liberal economies.
Let the French enjoy their moment. This GSE bailout is far from the market lead solution championed by the US. Individual borrowers who couldn't really afford their homes and institutions that dabbled in the underlying mortgage debt are being supported by the US taxpayer. Washington says the GSE's are too big to fail and that catch all justifies the intervention.
History is being written on the hoof here, and hindsight will legitimize or otherwise the first reactions. Asset markets have decided that losses are being nationalized - and the risk appetite for equities has returned. We will have to see whether this rally can last more than a few days as investors ask what has really changed.
The GSEs apparently already enjoyed the government's lender of last resort guarantee. The market has tested the promise and Hank Paulson has shown the government is unwilling to abandon the eighty percent of the mortgage market represented. But the housing market and the balance sheets of the financials remain 'broken'. The Federal deficit is only set to grow as the GSE portfolio is managed before being shrunk.
Will this move increase home buyers access to credit? We do not know the answer yet. Will foreign investors become less confident about owning US assets? Unlikely. But the commitment the Treasury has now entered into appears open-ended, which can hardly make owners of US government debt happy.
The e-mail to the show this morning from all over the world (but especially America) was mostly angry. Angry that main street is going to bail out Wall Street. Angry that reckless borrowers may have their 'loans reclassified as solvent'.
And angry that government intervention presents the US in a weakened light.
The new US President will be under pressure to identify those to blame, and to tighten oversight of the banking system. Of course to argue the country is becoming more socialist as a result of this bailout is a little flippant. But there is a serious point to be made. American taxpayers deserve and will probably get greater financial regulation. The light touch has led to negligent lending practices and an excess of cheap money.
It might also be appropriate for American critics of French interventionism to bite their tongues - for the time being at least.
Send feedback via the blog (click here) or directly to CNBC Europe.
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