he knows that the fix was in on this one. members of his own government were running around the financial markets all year, trying to freak out central banks and start a run on the bank. i have high conviction that folks in government were leaking to members of the investment community about what was going on behind the scenes. it was the same cast of characters who tried to take down fannie with blatant lies that were leaked to the markets via the press in 2004/2005.

rather than give in to the true believers who wanted to use the credit crisis to shut down the companies, paulson structured a transaction that solidified the companies, gave existing shareholders a chance to see this credit/political cycle through to the other side, and kept the ideologues at bay.

lockhart and demarco can now slug it out with barney frank and chris dodd next year after paulson’s left town. that should be interesting to watch, esp since the dems will have 55 votes or more in the senate, even if mccain wins.

the two numbers that are the most important to this process – the cum loss estimates MS used to justify the action – ought to be the matter of public record.

my analysis, based on vintage curves from the 06/07 books of business were that freddie was heading towards 20-25B of losses; fannie was probably $40-50B.

both were easily absorb-able given the revenue bases and existing loan loss reserves, not to mention the fact that the timing of the cash outflows was over a 5-7 year period.

this whole thing stinks – and not for the reasons that are being trumpeted in the media.

Also, can't find the source, but I thought the trigger for the whole bailout this wkend was the discovery of deferred tax credits counting toward F/F's regulatory capital. IOW, the Feds concluded that once the deferred tax credits were removed, F/F had in fact breached their capital requirements –> conservatorship.

Also, in terms of constitutionality, where does the Fed get the pwr to commit a whole lot of American tax $ to this bailout? Shouldn't this have had to go through Congress. I'm thinking that this must fall under emergency appropriations but can anyone shed further light?

Here’s the deal boys and girls:
1. The largest financial institution in the USA is now being run by politicians.
2. There are no rules that apply to politicians.
3. There will be no rules, whatsoever, applied to the financial conduct of the former Fannie/Freddie other than the “rules” of political expediency.

Earl L. Crockett
Santa Cruz, CA

Someone above suggests that this tax regulation was unconstitional. Guess what? The taking of the GSE’s from their shareholders without compensation was unconstitutional, too.

LEH may be next, watch out capitalists! You thought only in Russia and Venezuela was it ok to take private property for the public’s benefit without compensation. Wrong!

If so, cutting them now, while the firms almost certainly face losses, would just increase the accounting deficit according to GAAP… And therefore the cash that Treasury must inject today.

Under the circumstances, this seems like a very reasonable move…

Isn’t this unconstitutional? God, I am so naive. Who is left to challenge it?