Speaking before voters in Colorado Springs [yesterday], the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers." The companies, as McClatchy reported, "aren't taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization."Economists and analysts pounced on the misstatement, saying it demonstrated a lack of understanding about one of the key economic issues likely to face the next administration.
"You would like to think that someone who is going to be vice president and conceivable president would know what Fannie and Freddie do," said Dean Baker, co-director of the Center for Economic and Policy Research. "These are huge institutions and they are absolutely central to our country's mortgage debt. To not have a clue what they do doesn't speak well for her, I'd say."
Added Andrew Jakabovics, an economic analysts for the progressive think tank, Center for American Progress: "It is somewhat nonsensical because up until yesterday there was sort of no public funding there. Even today they haven't drawn down any of the credit line they have given to Treasury. 'Gotten too big and too expensive' are two separate things. The too big has been a conservative mantra for a while and there is something to be said of that in that they hold about half of the mortgage guarantees that are out there. And in the last year they have been responsible for roughly 80 percent out there. The 'too expensive to tax payers,' I don't know where that comes from."
It's a tough one to spin. Fannie Mae and Freddie Mac weren't receiving any taxpayer money. So how could they be "too expensive to the taxpayers"? Indeed, Palin seems to have it backwards -- now Fannie Mae and Freddie Mac will be funded by the government and will be expensive to the taxpayers, a policy dynamic both presidential candidates support.
In all likelihood, Palin doesn't know much about Fannie Mae and Freddie Mac, and hadn't been briefed properly on her position on housing policy.
How embarrassing is this likely to be? My hunch is, not very. Plenty of reporters noted Palin's quote, but practically all of them omitted any reference to her confusion. For that matter, most Americans probably don't know that much about Fannie Mae and Freddie Mac, either.
But it doesn't exactly inspire confidence in her policy expertise, either. If there are voters questioning Palin's readiness for national office, flubbing housing policy in the midst of a foreclosure crisis, at a minimum, doesn't help.