By Steve Winn, Kansas City Star Editorial Page columnist

The irritating cliché about the federal government’s seizure of Fannie Mae and Freddie Mac is that the companies are absolutely crucial to the home mortgage market.

Of course they are. Unfortunately, that’s precisely the role that Washington gave them.
But that’s little consolation for average U.S. taxpayers, who can now look forward to pumping tens of billions of dollars for years into fixing the mess made by these two favored companies — as their former CEOs head out the door, incidentally, with multi-million-dollar exit packages totaling …
You don’t really want to know, do you? Trust me, it won’t brighten your day.
Federal officials failed to rein in the two reckless mortgage giants until this week, and then only because investors around the world were reaching for the panic button.

There are so many appalling things about this debacle that it is hard to know where to start.

But here are three that come to mind:
It is a classic example of the pitfalls of “public-private partnerships.”

That phrase has a nice ring to it, and it is popular with politicians at all levels of government, not to mention real estate developers, owners of professional sports teams and so on.
But the public often serves simply as the junior partner that ends up holding the bag when things go wrong.

Fannie and Freddie were private companies on whom the federal government bestowed all kinds of special advantages over their competitors.
When money was made, it went to those who owned these two companies and to their lavishly compensated executives.

But now that Fannie and Freddie are hemorrhaging massive amounts of money, well, it is time for the junior partner — the American taxpayer — to get involved.

Remember to bring your checkbook.
This melt-down was so predictable, and in fact was predicted by many critics of the so-called “business model” for Fannie and Freddie.

As we saw in the savings and loan disaster years ago, when financial incentives encourage companies and their executives to behave recklessly, they will behave … recklessly!

Less than two months ago, Treasury Secretary Henry Paulson observed that for market discipline to work properly, market participants must not be led to expect that government assistance will be “readily available.”

Yet Paulson combined this little economics lecture last July with a “business as usual” message to the mortgage giants:

“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”

Well, that didn’t work out very well. Now Paulson finally sees the problem.

But incredibly, some members of Congress this week are still talking as though they don’t.

The federal government can’t afford financial mistakes on such a colossal scale.

The federal debt is already approaching $9.7 trillion, costing taxpayers huge amounts of money every year in interest payments alone.

What is less understood, however, is that this official debt figure is only a fraction of the government’s total liabilities, notably for Medicare as the population ages.

These liabilities are estimated at $52.7 trillion — or about $175,000 per person, according to the Concord Coalition, a bipartisan budget watchdog group.

In other words, taxpayers are in for a tough time already in the years ahead — regardless of all the happy talk about tax cuts in the presidential campaign.

So the guiding principle in cleaning up the home-mortgage mess should be: Don’t expose taxpayers to even more financial risk in the future.

We just can’t afford it.

To reach Steve Winn, deputy editorial page editor, call 816-234-4477 or send e-mail to