Dont worry so much. These things work themselves out. Fannie Mae was pretty much the dept of EDU anyhow right? Its not real money anyhow so dont worry so much.

True; not real money, but then again, none of it is anymore: http://en.wikipedia.org/wiki/Bretton_Woods_system

I am really wondering what is going to happen to US government bond prices after this. The US just took on a TON of debt, so in practice, this is a lot like stock dilution.

Fannie and Freddy both had really lengthened their tethers to the US gov't over the years, so this is still a big change.

Good old Mike Shedlock (fantastic financial writer) has a really good piece on it here: http://globaleconomicanalysis.blogspot.com/2008/09/paulson-rolls-dice-at-taxpayer-expense.html

At best, those $1000 checks y'all got down there; they just picked your pocket for about the same amount. By the way; the better than expected GNP numbers a few weeks back? Those were from SPENDING those checks. Just a method of propping up the numbers on the economy for another quarter before the election.

The best/worst part?

I just found something really awful out.

The current default/foreclosure rate for US mortgages is at 9%.

FNM/FRE have 5 and a half trillion in mortgages, ergo: they are exposed to at least 500bln in losses.

Which Paulson just hot potatoed over to the taxpayers.

Depends on which government, but no. Fannie and Freddie started out as GSEs anyhow. It is surprising how much socialism exists in the USA, if you just know where to look.

I do think that the FDIC approach would be a better one in this case, but they really don't have the reserves to handle entities as big as F+F. By the FDIC approach, I mean insuring deposits, and turning control over to another private firm. The problem is that F+F aren't really normal banks, and are just too damn big.

Hey that is cool. I never meant to imply that GSEs are intrinsically bad, just that you shouldn't make a bank which handles 50% of the countries mortgages which is government sponsored, since it leads to "moral hazard". Realistically, any idiot, perhaps even a politician, should have predicted that they would take un-necessary risks due to a sense of invulnerability, and bottomless funding.

Shortest name for it is the "21st century New Deal.."

Some friends and I are watching with amazement at the bail out package coming out for the Banks and financial house of ill preparedness. Have a feeling this won't be the last bail out of them and it will be spun as some new government interventionism.