Fannie Mae and Freddie Mac are now preparing to sell bonds that supposedly indemnify us taxpayers from the results of another mortgage market melt-down.

Called Connecticut Avenue Securities by Fannie Mae and Structured Agency Credit Risk by Freddie Mac, the securities are essentially bonds whose performance is tied to that of a pool of mortgages. If the mortgages default, investors in the bonds could lose some or all of their principal.

That’s the claim. There are a number of fallacies to this. One is that Fannie and Freddie still are government controlled. Another is that the government, through the Fannie-Freddie regulator, the Federal Housing Finance Agency, has already demonstrated that it will manipulate regulations and pass along actual money to “protect” these agencies from failure.

The largest fallacy, though, is exposed by Lewis Ranieri, who co-invented mortgage-backed securities in his own assessment of this nascent Federal scam:

There’s still a question of whether [the securities sales] can be expanded to really provide the goal of making the government the guarantor of last resort.

Government as guarantor of last resort means us taxpayers aren’t protected from anything that Fannie or Freddie might take a notion to try our luck at.

In the end, though, why should government—which is to say, you and I—be the guarantor of anything in a free market other than that it is, in fact, free, with all transactions freely entered into and with each of the participants in any exchange—and no one else—owning every bit of their part of that exchange?

In a Fox Business piece concerning the impact of future Federal Reserve Bank interest rate hikes on the stock market, this remark stands out for me.

[C]onventional wisdom holds that the more skillful Fed officials are at telegraphing their upcoming rate hikes, the less volatile markets will be once those hikes are announced.

That’s true enough as far as it goes, but the interesting bit is that the more skillful Fed officials are at telegraphing phrase.

Ordinarily, there’s no skill at all involved in making a simple, straightforward statement. One such could be we’ll raise interest rates by these increments, according to this schedule. Those milestones will be adjusted in this way by these factors that we will observe in real time.

That sort of clear, direct statement only takes skill when the speaker is a member of an organization which has institutionalized obfuscation.