Senator Calls Fannie/Freddie Bailout GOP 'Socialism'

     Should beleaguered government-sponsored enterprises Fannie Mae and Freddie Mac live to see another bailout – regardless of the cost?

     Treasury Secretary Henry Paulson said so. Paulson has requested unprecedented power to use taxpayer funds to rescue Fannie Mae (NYSE: [1]FNM) and Freddie Mac (NYSE:), the U.S. mortgage GSEs struggling with a recent collapse of confidence. 

      But Sen. Jim Bunning (R-Ky.) disagrees. Bunning appeared on CNBC’s July 15 “Kudlow & Company” to elaborate on his view of Paulson’s proposal after blasting it earlier in the day at the Senate Banking Committee’s monetary policy hearing. 

     “[T]he administration is absolutely wrong in bailing out Bear Stearns and/or Freddie and Fannie,” Bunning said. “And the Secretary of the Treasury and the complicity of the Fed Chairman [Ben Bernanke] to these two things – you’re absolutely right, we have socialism in the Republican Party and this administration.”

     Although some politicians and pundits would prefer to see a bailout of Fannie and Freddie – [2]including CNBC’s Jim Cramer – some members of the Senate Banking Committee have expressed reservations [3]In hearings on July 15 about granting bailout power to Paulson and future secretaries, none was more outspoken than Bunning.

     “[W]hen I picked up my newspaper yesterday, I thought I woke up in France,” Bunning said during the hearing. “But no, it turned out it was socialism here in the United States of America and very well, going well. The Treasury secretary is now asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed purchase of Bear Stearns assets was amateur socialism compared to this.”

     Bunning stated that he was concerned there were no guarantees this type of bailout would have to happen again.

     “And for this unprecedented intervention in our free markets – what assurances do we get that it will not happen again? Absolutely none,” Bunning added.

     Bunning vowed to block any such measure during the hearing, [4]which according Sen. Charles Schumer (D-N.Y.) implied he was threatening to filibuster. Overriding the filibuster would require the Senate to have 60 votes to enact any Freddie Mac/Fannie Mae reform legislation, versus a simple majority otherwise.