The nationalisation of Fannie Mae and Freddie Mac

Larry Elliot writes a good article on what is effectively the nationalisation of Freddie Mac and Fannie Mae. He points out that, by doing so, the US government has added about £3 trillion to its national debt - which is more than twice Britain's GDP.

The events do show that the Bush administration is not as laissez-faire as it makes out. It does not want to wash its hands of the crisis in the way that people feel Hoover did in the early 1930s. It goes to show that, for all its talk of free markets, when it comes to economic crisis for which they are accountable for - the US Right have been willing to undertake the biggest nationalisation in world history to stop things getting worse. The US seems to preach free market policies to the Third World but, when it comes to the crunch, democratically-accountable politicians ignore their own preaching and go for what could practically help the American housing market.

Larry Elliot rightly points out that this whole episode is a blow to the neo-liberal idea that private financial markets are perfectly functioning and that there is no need for much regulation. There is thus an opening for more social democratic policies. With the right degree of boldness, both Gordon Brown and Barack Obama could seize this opportunity. Unfortunately, as Elliot sadly notes, both seem to be missing the chance of an open goal.