Helping the Little Investor

So the long-awaited housing bill passed Congress, and I'm supposed to be cheered by the fact that 400,000 homeowners in danger of foreclosure are going to get some measure of help, the extent of which is unknown. But I can't help but wonder why it's any business of the federal government to throw a lifeline to investors in publicly traded companies. The idea that shareholders get scooped up in the bailout because of perhaps legitimate needs for a large institution to be saved doesn't make any sense. There are plenty of ways to separate the two.

I've heard members of Congress say that the stockholders have already lost 80 percent of their investment. So what? Losing 80 percent is better than losing 100 percent. Furthermore, not all stockholders bought their shares last year. Some bought their shares last month, just before the Fed, Treasury, and Congress came to the rescue.

So, what's the deal? I don't want to think bad things about our political leaders, so what legitimate reason could they have for putting Fannie and Freddie stockholders ahead of children needing child care and health care or seniors who can't afford to pay for heating oil this winter?

Now, we know why Republicans do this - shareholders are their base, and poor people needing help with their heating bill certainly aren't.

(Just a moment to marvel at that - Republicans are stamping their little feet that they haven't been allowed to shovel billions of dollars in leases to their oil company buddies, so they're holding hostage poor people who need energy assistance.)

Democrats, of course, are the recipients of a lot of banking industry largesse now that they're in the majority. And we know that this housing bill had a substantial portion of it written by Bank of America lobbyists. So they look the other way when their bailout of Fannie and Freddie gives a push to the shareholders and not just the homeowners.

It's the dirty business of politics, and if a bunch of far worse indignities haven't been tossed on us then I'd be more willing to accept them.

UPDATE: Paul Krugman has more today. Short version - there had better be fundamental reforms coming down the road, or we're screwed.