...that the government takes over tens of $billions of mortgage liability and gets deeper in debt to do it. In addition, it looks like the common stock of Fannie Mae and Freddie Mac is wiped out which could send the markets into a crash on Monday.

Was just reading today that 9% of all mortgages in the US are delinquent or in foreclosure.

Geesh.  Not that the private sector mortgage industry has managed to handle it much better.  All this running amok in the market place...ye gods.

My head hurts.  I'm seriously thinking about engaging in the practice of downward mobility - just to save myself the heartache of the burden of taxes coming our way. 

there are probably biggers minds that would have better ideas, but from my limited knowledge the other options aren't much better.

We could write Fannie and Freddy a multi billion dollar check asking nothing in return and pray that it is enough to prop them up. But with their record it is unlikely, they are saddled with potentially hundreds of billions if not trillions of dollars in toxic mortgage debt and there is zero investor confidence.

The other option is to just let Fannie and Freddie crash and burn. However if we took that approach we could risk a total melt down, the market won't like this, but it's nothing compared to what would happen if Fannie and Freddie went bankrupt. Just about every mortgage in the country is effected in one way or another by Fannie and Freddie, so doing nothing is really not an option.

The biggest downside in my mind is by taking over Fannie and Freddie the government just assumed liability for vast untold sums of money in toxic subprime mortgages.

It's not a great option, but we find ourselves in a situation where we are left with few easy solutions. Maybe greater minds will have better ideas, I certainly hope so.

In any case look for the market to tank on monday, it's every day traders worst nightmare.

"diluted" however there really aren't any specifics, it could mean anything from 75% of value to pennies on the dollar.

I agree, the markets are not going to like the news one bit, probably one reason why the announcement came after the closing bell on a friday.

Even though the stocks of Fannie Mae/Freddie Mac are halted (with them losing 50% overseas), it looks like the other financial stocks are going to be up big time since the government is basically stepping in to protect their holdings and also buying the bonds (hey US tax payer...how do you like being the new investor of mortgage backed securities?)

Futures up close to 300 pts on the DOW this morning.

the opportunity to make big bucks, and they have made great profits for many years.

http://hnn.us/articles/1849.html

Now they are losing money and want to be bailed out by the taxpayers.

Personally, I'm against bailing them out. However, it's pretty much the same thing we did recently for some other big financial outfit, so I suppose the individually powerful financial sharks are all pressuring our elected officials to do it again. If there were any justice for the little guys, though, we would simply nationalize their assets and let them figure out how to meet their liabilities.

Nick Kelly

Wes Clark could still secure America as a national security candidate.

:-)