Timothy Geithner - 2009 Christmas Grinch? Photo: Public Domain
‘Twas the night before Christmas, when all through the house, not a creature was stirring, not even a mouse; with the exception of Treasury Secretary Timothy Geithner. While visions of sugar-plums danced in his head, Guitner was giving Freddie and Fannie a new blank check! That’s correct, he lifted the ceiling of $200 billion each, without the need of approval from either Congress or the Senate.
CNNMoney Reports – (excellent video discussion): Charles Haldeman and Michael Williams, chief executives of government-controlled mortgage giants Fannie Mae and Freddie Mac, each get a $6 million cash bonus. What’s amazing is that our government’s pay czar, Kenneth Feinberg, has cut cash payouts at taxpayer-backed companies like AIG (AIG, Fortune 500), Chrysler Financial and GMAC.
Feinberg has made drastic cuts to CEO income and their bonus. He has required them to take much of their bonus in the from of stocks rather than cash. Neither Haldeman nor Williams will take any stock in lieu of cash! Fannie and Freddie have not improved their financial crisis which seems to continue to escalate, yet they not only will receive a bonus but are not asked to share the risk by taking future benefits in the form of stocks.
Our current financial crisis started in 2008 with Fannie Mae and Freddie Mac. They were our first federal bailouts totalying $200 billion each, of taxpayer money! Yet 3 out of every 4 mortgages being written to date are by these 2 companies.
And now for the rest of the story …
You may be asking how Freddie Mac and Fanny Mae would have any affect on Medicare. We have thrown $400 billion into both companies who continue to be on a path of destruction, yet the Treasury has just lifted the cap for unlimited funding. Yet, according to the liberals we need to cut Medicare by $500 billion dollars which will be used to pay for the healthcare bill, not to shore up the future of Medicare.
Do you know how Medicare receives their funding?
Above is a very simplistic graphic to give you a basic visual as to how money goes into Medicare. As you can see all money coming into the government is collected by the Treasury. The Treasury pays out cash (in the form of checks) to cover federal financial obligations. How the money is paid into Medicare is a little different.
The financing of Medicare is through 2 different trust funds. There is the Hospital Insurance Trust Fund (HI) and The Supplementary Medical Insurance Trust Fund (SMI). For detailed information on these trust accounts see: http://www.kff.org/medicare/upload/7731-02.pdf
The difference between the 2 Trust Funds has to do with financial stability. Each year government agencies estimate the amount of funds needed in the HI trust fund to meet it obligations for payments to Medicare claims. The “excess” of that estimate is loaned to the federal government. The Treasury then takes that “excess” cash to pay for other federal obligations that have nothing to do with Medicare. The Treasury issues a bond (IOU) to the HI Trust Fund which includes interest.
In realistic terms, money you think you are paying into the HI Medicare Trust is actually paying other government debts. It’s spent – gone! When Medicare wants to cash in the bonds, it has to come from new money in the treasury. If there is not enough money to pay the bond, it must be borrowed or printed.
CBO document dated 12/23/2009
The key point is that the savings to the HI trust fund under the PPACA would be received by the government only once, so they cannot be set aside to pay for future Medicare spending and, at the same time, pay for current spending on other parts of the legislation or on other programs. Trust fund accounting shows the magnitude of the savings within the trust fund, and those savings indeed improve the solvency of that fund; however, that accounting ignores the burden that would be faced by the rest of the government later in redeeming the bonds held by the trust fund. Unified budget accounting shows that the majority of the HI trust fund savings would be used to pay for other spending under the PPACA and would not enhance the ability of the government to redeem the bonds credited to the trust fund to pay for future Medicare benefits.
Obama expects taxpayers continued support of the failing housing market through Fannie Mae and Freddie Mac but what are they doing to protect the future of seniors to have acccess to health care? The current healthcare bill certainly is not strengthing Medicare, if anything it appears that seniors will have less health care.
What happens to seniors that own their own homes and are being devistated with overwhelming property taxes? Does the government care if seniors loose their homes or will the government benefit from being able to expand the use of the property to generate greater tax revenue? Will the government come to the rescue to save us from loosing our homes due to unpaid property taxes? You decide.
Food for thought – In 2009, Obama Treasury Secretary Timothy Geithner admitted that he failed to pay $34,000 in Social Security and Medicare taxes from 2001-2004. It might appear that Medicare and Social Security may not be a high priority for our Treasury Secretary!
- Most corrupt politicians of 2009 named by Judicial Watch
- How is Medicare Funded?
- Santa showers Fannie, Freddie with cash
- U.S. to Lose $400 Billion on Fannie, Freddie, Wallison Says
- CBO: Democrats Double-Counting Medicare Savings
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