Regulators worked overtime this weekend to concoct some sort of plan to stem a potential full-blown market collapse following a pummeling in financial stocks all week that culminated in IndyMac's failure on Friday afternoon.
The good news is that they seem to have been successful in implementing some level of confidence as futures are up this morning.
The bad news? The prospect of the government shoveling tax money into Fannie and Freddie in the form of debt and equity financing could possibly turn into a very expensive proposition over the long term, depending on how poorly Fannie and Freddie's assets eventually perform.
Of course, the US government can print unlimited amounts of money to prop up the housing market, that is if nobody minds that a head of lettuce is going to cost $5 more in the afternoon than it did in the morning on any given day. We won't even get into what it may cost to fill up your gas tank.
Hank Paulson asked that Congress to allow the Treasury temporary authority to buy equity in the firms if necessary and to increase their lines of credit. Meanwhile, the SEC has announced it will crack down on the spread of false rumors intended to manipulate stock prices.
The FDIC was busy organizing an orderly liquidation of IndyMac.
Finally, the OTS and Chuck Schumer were busy blaming each other for who was responsible for the run on the bank. At least a few of our regulators were attempting to enact positive measures, which is always reassuring.
Source: Reported by Mock The Market http://mockthemarket.blogspot.com/
Blown Mortgage Reported yesterday about the Fannie Mae and Freddie Mac bailout coming up today.
"The talk of a bailout has finally been realized (as if there was ever a doubt). On Monday, the Federal Government will explicitly guarantee the debt of Freddie Mac and Fannie Mae by lending it money and by buying billions of dollars in mortgage debt held by the two giants. Treasury Secretary Hank Paulson asked for Congress’ permission to take the unprecedented step to ensure the viability of the GSEs which have bought or financed roughly half of the country’s $12 trillion in mortgage debt.
"Like you couldn’t see this coming. In fact the $300 billion homeowner rescue plan will pale in comparison to what the government will have to do to shore up the ailing mortgage giants. Now, no matter who you are, if you’re paying taxes you’re footing the bill for the greed and excess that was the housing bubble. You’re welcome."