‘Net worth sweep’ and Obamacare’s endless bailouts
One Obamacare bailout folks are familiar with is for "risk corridors." Those bailouts involve direct payments to insurance companies that suffer losses in the Obamacare exchanges. A less well known bailout is "Net Worth Sweep," which involve raids on private property.
On March 23, the Daily Caller ran Drew Johnson's "Trump Should Stop Obama Scheme That Steals Money For Obamacare." Johnson reports on the theft of monies from both Fannie Mae and Freddie Mac to give to health insurance companies that can't make a profit under Obamacare:
Since 2013, however, all of the profits generated by Fannie and Freddie have been swept into the Treasury Department's general funds. Not a dime has been returned to investors or set aside for a rainy day.
This raiding of Fannie and Freddie profits has become known as the "Net Worth Sweep." The maneuver, which takes place regularly with no Congressional authority, inappropriately diverted $240 billion in dividends from investors to federal programs such as Obamacare.
The latest scheduled quarterly dividend payment had been watched particularly closely because it was the first tangible action by the new Administration on Fannie and Freddie. Since the Obama Treasury took advantage of the conservatorship in 2012 to implement the Net Worth Sweep and drain enough of Fannie and Freddie's capital to weaken but not kill them, the situation for taxpayers, home buyers, capital markets and, of course, shareholders has gone from bad to worse. The day when the under-capitalized government sponsored enterprises come to the taxpayer for more money draws near.
On March 3, Forbes ran Richard Epstein's "D.C. Circuit Refuses To See Limits To Government Power And Inexcusably Upholds The Net Worth Sweep." Epstein, a fellow at the Hoover Institution, details the Feb. 21 opinion in a case brought by Perry Capital LLC against Obama treasury secretary Jack Lew. The five-page article may be too technical for some readers, but I'll quote from the final paragraph:
In closing, there is a simple test by which to measure the probity of the combined actions of FHFA and Treasury. If FHFA were replaced by a private trustee, and Treasury were replaced by a private supplier of fresh debt or equity capital, both parties would end up in jail if they concocted a scheme that resembled the NWS. Everyone would cut through the various smokescreens to see that the excess dividends were a naked raid on the interests of the other shareholders as happened here. The great tragedy of the majority opinion is it follows the all-too-common practice of giving the government a free pass when its own motives are as corrupt, or more so, than comparable private parties in similar roles and with similar legal duties. From the time that I started to work on this issue, I always said that litigating against the government is like playing craps with loaded dice. So far the sorry performance in Perry Capital has validated that gloomy prediction. The time is running short, but there needs to be some serious judicial action either in the Circuit Court or Supreme Court to correct against the egregious statutory contortions and manifest injustice of sustaining the Net Worth Sweep.
Net Worth Sweep brings to mind the bailouts of the auto companies during the Obama era, when bondholders got the shaft. I remember when we had private property in these United States.
On April 4, Tucker Carlson hosted Josh Rosner, who gave a quick gloss of these "irregularities," shall we call them, in the Obama administration. Fox News doesn't seem to have posted the segment, but I found it here. Or watch it here:
Jon N. Hall of Ultracon Opinion is a programmer/analyst from Kansas City.