‘Helicopter Ben’ Bernanke and the ‘Bankers’ Bailout’

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Since there is so much opposition here to the idea of using taxpayer money to bail out borrowers and lenders who made bad choices, it’s worth facing the facts: a stealth government bailout of the mortgage industry is well underway, and a bigger, more ambitious rescue plan appears more likely every day.

Today the Fed is gladly accepting as collateral mortgage-backed securities that are so toxic the private sector can’t even put a price tag on them. As John Cassidy wrote recently in Portfolio, ‘This is the same toxic paper that institutions like Citigroup and Merrill Lynch have been unable to sell or even value because the market for it has dried up.’

Or, as The New York Times columnist Paul Krugman wrote, ‘In a worst-case scenario, the Federal Reserve would find itself owning around $200 billion worth of mortgage-backed securities.’ The problem is, Krugman made that estimate before today’s new lifeline from the Fed.

Fed Chairman Ben Bernanke’s latest dollar-dumping mission (they don’t call him ‘Helicopter Ben’ for nothing) is the latest chapter in what Cassidy calls ‘The Bankers’ Bailout.’ It’s too late to write your congressman to protest -- the bailout began last summer: ‘’It is no exaggeration to say that the mortgage market was effectively nationalized’ in the third quarter, BNP Paribas economist Richard Iley wrote.

Quickly and quietly, risk has been shifted from the private sector to the Fed, Fannie Mae, Freddie Mac and the FHA. The only question now is how much more risk will be offloaded onto the government, and how Congress will structure the various lifelines, rescues and giveaways. And lastly, what maddening acronyms they will dream up as a patriotic cover for the whole thing. (HOPE NOW! The SAFE Act! The HOME Act!)

Feel free to send in your favorite acronyms for future bailouts and rescue plans.
Photo Credit: Fed Chairman Ben Bernanke, by Bloomberg News.