The LA Times reports that "The price tag for the nation's housing crisis escalated again with reports Tuesday that a record number of Californians lost their homes to foreclosure in the last three months and that a potential bailout of mortgage giants Fannie Mae and Freddie Mac could reach $25 billion."  And Congresswoman Loretta Sanchez (despite the best OC July house buying since 2005) supports passing that cost on to taxpayers, their children, and grandchildren, in a bailout of Fannie Mae, a failing  government-sponsored enterprise, whose corruption reaches Enron proportions.

The Von Mises Institute's Karen Coster documents the corruption at Fannie Mae.  In 2004, Fannie Mae was caught in a major accounting scandal, forcing it to restate earnings by $11 billion.  The article quotes James Lockhart, Director of the Office of Federal Housing Oversight (OFHEO), as finding that "Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing."  Coster reports that Fannie Mae then stopped filing financial statements with the SEC, and hasn't held a shareholder meeting in three years.

Coster documents how the housing bubble was government policy, with the Fed viewing housing prices as "a key channel of monetary policy transmission" (translation: with fed funds rate at 1%, housing prices were a means of printing money). Fannie Mae played a central role in that policy.  Yet, as Coster points out, the SEC and government entities have sat on their hands, rather than scrutinizing Fannie Mae, whose Board members (unsurprisingly), "some of whom are appointed by the president -- have been highly representative of the Beltway elite: a former Reagan chief of staff, lobbyists, a former aide to Nixon, a Reagan Secretary of Labor, a US trade representative, and a top economic advisor to President Bush."

As if that weren't bad enough, The Economist reports that Treasury Secretary Paulson and the Fed have given Fannie Mae the ability to print money.  Paulson proposed that Fannie Mae be given access to the Fed "discount window", allowing it to borrow government money using its own (dubious) debt as collateral (sticking taxpayers with the turkeys).  The Fed agreed.  And Wall Street Journal reports that Treasury (bizarrely) has proposed approval to buy equity stakes in Fannie Mae and Freddie Mac.  (Secretary Paulson, former CEO of Goldman Sachs, feels it prudent to invest taxpayer money in a scandal-ridden business.)

Taxpayers should tell Ms. Sanchez, John Campbell, Dana Rohrabacher, Ken Calvert, and anyone in Washington that will listen that we need less government intervention, not more.  These crises are the result of relentless government intervention in the market (not market failures), and further intervention is election year insanity (trying the same thing over and over again, each time expecting a different result). 

Unfortunately, Bush has said he will sign the misguided legislation.  (See kids, don't do drugs!)