As a free market advocate I am concerned about federal bailout of private financial firms whether it is Bear Sterns, Long Term Capital or Fannie Mae and Freddie Mac. What was the SEC and other federal regulatory agencies (OCC) doing when these firms were engaging in ridiculous practices?

Freddie Mac today reported its corporate earnings for the second quarter and as expected by many analysts it eneded up having a big loss. The mortgage lender company lost 821 million dollars in the second quarter.

Treasury and Fed Promise Bailout for Fannie and Feddie, SEC Crack Down on Rumors. Bloomberg reports that US Stock-Index Futures Gain; Fannie Mae, Freddie Mac Advance.

The financial crisis symptom de jure: the struggles faced by Freddie Mac and Fannie Mae the giant mortgage loan repackaging companies chartered by the U.S. government, and (assumed to be) guaranteed by Congress. In fact the loan guarantees with the Treasury Department that are available to the companies amount to only a few billion dollars, so the US government's official obligation to help is miniscule.

The Federal Housing Finance Regulatory Reform Act of 2008 passed the senate with an overwhelming 19 to 2 vote. The new act is designed to help stem the foreclosure crisis and to reform regulations of Fannie Mae, Freddie Mac and the Federal Home Loan Bank system.

Freddie Mac shares rose this morning as the company posted a narrower loss than estimated by analysts. Freddie lost $151 million in the first quarter.

If Fannie and Freddie fail the price tag is somewhere between $400 billion and a shade over a trillion of taxpayer money to bail them out. How do you like them apples? A trillion bucks? Big enough to sink the government’s AAA rating. Big enough to make LTCM look like child’s play. This is some scary stuff folks.

While the news of the GSE picking up jumbo conforming loans is, in fact, news, the bigger story is that there hasn’t been much of an appetite for these loans through any channel. First let’s talk about the news of Freddie Mac purchasing jumbo conforming loans (up to $729,750) as part of the Economic Stimulus Act.

Freddie Mac (NYSE: FRE) announced today that it priced its new 3.50% $3 billion five-year USD Reference Notes® security due on May 29, 2013. The issue, CUSIP number 3137EABJ7, was priced at 99.548 to yield 3.594%, or 105.5 basis points more than five-year U.S. Treasury Notes. The issue will settle on March 14, 2008.

As long as the housing market begins to recover, Freddie Mac’s losses from the mortgage crisis may reach their lowest point by the end of the current year.