Thom Hartmann: And greetings my friends, patriots, lovers of democracy, truth and justice, believers in peace, freedom and the American Way. Thom Hartmann here with you. Our quote for the day from justice William J. Brennan: “If the right to privacy means anything it’s the right of the individual, married or single, to be free from unwarranted government intrusion.” Our first hour guest Dr. Yaron Brook will certainly agree with that. We’ll have him on in just a moment. I’ll just fill you in on what’s going on for the rest of the day. In our 2nd hour I want to get into this whole issue of have the banksters bought the White House and did the Supreme Court make it possible? Are we seeing the final stages of the total corruption of small d democracy in the United States and the triumph of laissez faire capitalism over democracy. And in our third hour Dr. Arthur Caplan is here. Did you know that if you have a child born now that their DNA is being taken and kept and in some cases sold to private corporations and there are some really interesting consequences coming out of this. Given that the Supreme Court has turned our government over to corporations, should progressives join the far right militia movement in pushing back against any sort of government intrusion in our lives? Our question for the third hour. But first, "an article in the Wall Street Journal", quoting today from Yaron Brook’s piece "It’s Time to Phase Out Fannie and Freddie." "An article in the Wall Street Journal today illustrates the hopeless futures of Fannie Mae and Freddie Mac. The companies have so far swallowed $111 billion of taxpayer money with no end in sight." And this from Yaron Brook and the Ayn Rand Center, Ayn Rand Center for Individual Rights, AynRand.org. Dr. Brook welcome to our program.

Yaron Brook: Thanks for having me on.

Thom Hartmann: You’re absolutely right. Fannie Mae and Freddy Mac are a mess, they’re sucking down money like a hog in a trough. Absolutely right.

Yaron Brook: Well, and they’ve been a mess for decades.

Thom Hartmann: About 20 years.

Yaron Brook: For 20 years at least and they are partially behind, you know, this whole financial crisis, a big part of this. I think they should be broken up, they should be, you know, basically privatized, eliminated. You know, if we want to explicitly support home ownership in America, fine, let’s tax Americans and let’s subsidize people’s homes. Let’s make it explicit, let’s have a big debate. But this is a sneaky roundabout way of doing the same thing and a lot of people are getting rich over these subsidies, primarily the executives of Freddy and Fannie. It’s just amazing to me.

Thom Hartmann: Yes. Yeah, no, I absolutely agree with you and right across the board on that, and here’s the history that probably our listeners don’t know. That the federal national mortgage association, Fannie Mae, was started during the Great Depression, was started in 1938 as part of the New Deal’s trinity of housing agencies. And the same with Freddy Mac. And that these programs actually when they were government agencies that were backstopping banks for mortgages, they actually worked. Nobody got filthy rich, nobody was paid anything more than a government salary to participate or work in them, mortgage brokers never went broke during that time, the government’s insurance programs in fact regularly turned a profit, these programs actually made a profit for the government because they were so solid and so stable, and this quaint archaic concept, they actually worked in the public interest. They worked to the good of everybody.

But then in 1968 in the Lyndon Johnson administration, as part of an attempt to get them off the government books and part of the early attempts to privatize things, Lyndon Johnson semi-privatized them. It took a little more than a decade before the brightest and the best in the Clinton administration and some of their corporate buddies discovered, figured out hey, you know here’s Freddy and Fannie and they’ve been partially privatized, why don’t we go in, I mean there’s still government guarantees here, we can make a pile of money with this thing and screw the average American and they did so under private management, you know, Fannie did a 180, it was just totally, you know they started buying these Alt-A loans, they never did buy the subprimes, but they bought the Alt-A’s which created a disaster. So here we have this cycle Yaron, the government creates something good that works, the private market takes it over and loses hundreds of billions of dollars and then the government bails it out. It’s nuts.

Yaron Brook: But you see, you see, you’re perverting a little bit because even you said that it wasn’t completely privatized, right, it was semi-privatized.

Thom Hartmann: That’s right, that’s right, which was wrong.

Yaron Brook: That to me is the real problem. But, you know, when it worked as a government entity they were very small, they had minimal impact on the markets, they, you know, they created this secure…

Thom Hartmann: They had a huge impact actually because they made it possible for people to buy homes.

Yaron Brook: Yes, but again, sure, I mean you could subsidize people’s homes, that you know there’s no problem with the government doing that. You know I think it’s bad, I think it’s wrong, but it can work, it’s not going to cause a financial crisis. It’s only going to cause a financial crisis when they’re allowed when their debt is subsidized the way it was and when they’re allowed to leverage, I think they were at some point a thousand to one. That could not exist. You talked about laissez faire capitalism before, that could not exist in laissez faire capitalism.

Thom Hartmann: No I agree, this is, although something equally awful could in laissez faire capitalism, I mean if there were no rules. You don’t want the government saying that a bank for example has to have a 10 to 1 you know debt to equity ratio?

Yaron Brook: No, but you know what actually happened…

Thom Hartmann: You don’t, you don’t want there to be any rules on banks.

Yaron Brook: But wait, wait, wait, what actually happens when the government has no debt to equity ratio provisions, because that’s what happened before the 1930s, banks had two to one. Banks made one to one.

Thom Hartmann: Well, but banks had whatever they damn well pleased and we never went more than 15 years from the founding of this country until 1935 without a bank panic.

Yaron Brook: Well, so banks went under, but there were periods in which the good banks were one to one, that is, that the market would never allow a bank to go more than two, maybe three to one. 10 to 1 is only made possible through government regulations. In the systemic disasters like the great depression and like what we’re experiencing right now can only happen when the government has its hands throughout the economy and primarily throughout the banking system. We do not have laissez faire capitalism. That’s not what’s going to take over. Maybe some form of corporatism…

Thom Hartmann: So let me get this straight, in…

Yaron Brook: But laissez faire capitalism does not exist in the United States and you know that.

Thom Hartmann: I agree with you, I agree with you and in fact the only places where true laissez faire capitalism, governments keeping its hands off, all together, are operating, are places like Somalia and Haiti.

Yaron Brook: Oh not true. Not true. Haiti, the government and founders are all over the place, certainly in Somalia…

Thom Hartmann: Let me get, actually no the government is so incompetent and dysfunctional down there it’s much closer to laissez faire than the United States, let's say that. But here’s, it sounds to me like, Yaron, what you’re saying is…

Yaron Brook: Oh no. Laissez faire… let me just say one thing… One thing Thom. Laissez faire assumes property rates. There are no property rights in Somalia, there are no property rights in Haiti.

Thom Hartmann: There absolutely are in Haiti, it’s about the only thing the government enforces down there is property rights.

Yaron Brook: Laissez faire assumes that government that protects rights. That’s pretty much all it does, or one of the few things it does, but it protects property rights and so there’s no such thing as capitalism without property rights. And there are no property rights in Haiti or in Somalia.

Thom Hartmann: Well, we’re gonna have to disagree on that. So what you’re saying is that from the founding of this country up until 1935 when there was virtually no regulation on banks and we had a major national bank panic at least every 15 years, that was a great time. And from 1935 until the 1980s when there were heavy regulations on banks and we didn’t have a single bank panic, that was a bad time because that was government regulation. Am I getting this right?

Yaron Brook: Well, a little bit right. So…

Thom Hartmann: We've got about a minute, Yaron, by the way.

Yaron Brook: Since establishing our Federal Reserve we’ve had three major economic catastrophes and lots of little ones. The three big ones were the great depression, inflation of the ‘70s and the current one. All caused by government regulations, by government control of the banking…

Thom Hartmann: Well, I would say the current one was caused by the deregulation.

Yaron Brook: Wait. The previous ones from the founding of America until the establishment of the Fed, first the economy grew at a much, much, much, much faster rate, the absorption of immigrants, the number of job creations is…

Thom Hartmann: The industrial revolution.

Yaron Brook: ...unprecedented in human history. And at the same time the bank panics were relatively mild but banks were heavily regulated even then they were just regulated at a state level not a federal level and I don’t advocate for that either. We’ve never had unfortunately, laissez faire banking in this country. If we did we’d have a stable banking system, and no panics.

Thom Hartmann: I think if we did we’d have all of us being serfs and slaves to the banks but uh, that…

Yaron Brook: Well we started out agreeing and we’ll end disagreeing.

Thom Hartmann: Okay. Yaron Brook. AynRand.org the website. Thanks Yaron for dropping by.

Yaron Brook: It’s always a pleasure Thom.

Thom Hartmann: Indeed.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.