Ford Motor Company, capping a weekend of high-stakes maneuvering, attempted to shore up confidence in Fannie Mae and Freddie Mac by announcing a plan that placed the automaker firmly behind the battered mortgage giants.The parallels are interesting.
In a statement timed to precede the opening of Asian markets Monday, as well as a closely watched auction of debt by Freddie, Ford said it plans to seek approval from its board of directors for a temporary increase in a longstanding Ford line of credit for the two companies.
Ford also said it would seek temporary authority so that it could buy equity in either company "if needed" to ensure they have "sufficient capital to continue to serve their mission" of providing a steady flow of money into home mortgages.
Ford is losing money - so is the US Government. Ford has massive long term debt - so does the US Government. Ford's economic future is uncertain - no one has a reliable plan for solvency for the US Government.
So what's the difference?
The US Government can print all the money it needs.
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Your comparison is flawed. Are you familiar with the concept of inflation? You can't just print more money and expect no effect on the value of the dollar.
ReplyDeleteGood point, Scott. The point I'm trying to make is that if Ford came out and said they were the mortgage backstop, no one would be relieved. It would be like trying to use a cinderblock as a life preserver. The US government, with a $9.5T debt, a current account deficit and a massive oncoming Social Security problem is not much different than Ford other than the ability to print money.
ReplyDeleteThe Confederacy, the Weimar Republic and Mugabe's Zimbabwe all had that power, too.