Larry Kudlow

There will be no more business as usual for housing lenders Fannie Mae and Freddie Mac if John McCain is elected president. That’s McCain’s clear message in a recent hard-hitting op-ed in the St. Petersburg Times and in various straight-talk media interviews.

Politically powerful Fannie and Freddie may be popping champagne corks in Washington, where a congressional bailout package provides full government backing for their outsized management pay packages, massive political-contribution and lobbying practices, and private portfolio hedge-fund activities. These government-sponsored enterprises (GSEs) got just what they wanted, and they now have the power to pay more dividends to their shareholders without any caps on compensation.

But Big Mac is gonna put an end to this if he’s elected come November.

“Americans should be outraged at the latest sweetheart deal in Washington,” writes McCain. “Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It’s a tribute to what these two institutions -- which most Americans have never heard of -- have bought with more than $170-million worth of lobbyists in the past decade.”

Fannie and Freddie represent the worst of Washington’s bailout fever. Using government power for private profit is how Wall Street Journal editor Paul Gigot puts it. Privatizing gains while socializing losses is the complaint registered by former House majority leader Dick Armey. Government semi-socialism is how I see it.

The GSEs spread political vigorish in turn for more power and more privilege. Just this year alone their portfolio caps were raised twice while their capital reserve requirements were lowered. And now, with an explicit government guarantee, unlimited credit lines, and the possibility of federal stock purchases, they’ll be GSEs on steroids. All this in the name of helping housing, the most favored political sector in the American economy.

Budget assistance for homebuyers is already staggering. The Housing and Urban Development department spends $52 billion a year. The home mortgage interest deduction is worth about $80 billion yearly. A capital-gains exclusion is estimated at $29 billion. And the local property-tax deduction comes to roughly $14 billion. That’s a total of $175 billion in annual assistance to the housing sector. And that’s before we get to the Fannie-Freddie bailout.

Some people talk about a so-called Marshall Plan to spur American energy independence. But for years we’ve had a Marshall Plan for housing. It’s enough already. There are other economic sectors worthy of investment.

Larry Kudlow

Lawrence Kudlow is host of CNBC’s “The Kudlow Report,” which airs nightly from 7 p.m. to 8 p.m.