Fannie Mae CEO calling Obama and the Dems the "Family" and "Conscience" of Fannie Mae:

AIG insures the money that we have barrowed from all of these other countries. Without that insurane; nations will call our loans.

AIG is the "FDIC, SCIP" insurance for foreign countries. And, who knows, they might underwrite the FDIC. I am not forgetting home owners, their loans could and should be placed in a "central bank" with government loans, the homeowners purchased these homes should have to pay for them, at full price. These Exec's that are being paid millions, have manipulate the banking and loans at the heart of this; selling them one to another; without any knowledge if the very person who made the loan was even working; let alone credit worthy.

The Federal government has the power to collect those debts; mom and pop people like you and me don't.

The events of the past few days, the government 'conservatorship' (or in other words, the nationalization) of Fannie Mae and Freddie Mac has reverberated through the markets. Now we hear that Merrill Lynch is being bought out by Bank of America, another financial institution swimming in sub-prime paper. Even the heart of the American establishment has not been spared. Lehman Brothers filed for bankruptcy yesterday after it became evident that no one would buy them out. Even foreign investors from China, Dubai, Europe, and even Russia has starting to get cold feet when it comes to capitalizing (and therefore subsidizing) our financial firms and equity markets.

That to me is the most troubling aspect of this. We not only face a capitalization problem, the banking system overall might be facing a liquidity problem as well. The Fed will try to help these companies work out their bad loans by lowering interest rates and pumping more liquidity into the system, but that will only create more problems; lowering interest rates is only a band-aid for a gaping wound. The dollar will continue to weaken, as inflation rears its ugly head once again. That will be bad news for consumer spending. The reality is that, at least for the past ten years, our foreign creditors like China would lend our Treasury money to finance our high spending. China would then in turn use the profits from those financial ventures to build up their infrastructure and industrial base. The US would get the needed liquidity to finance our import driven lifestyle.

There are now a multitude of problems coming in at the same time. The real estate driven boom of the past few years has gone bust. Speculation in the markets was rife during the period between 2003-2006 in particular. Essentially, we had a system where high risk investments would be immediately rewarded with high returns; however much of that risk was not properly analyzed. Particularly in the mortgage market, many people received car and home loans that under normal criteria would be ineligible. The result has been nothing short of disastrous. All this debt and risk still has to work through the financial system. There will be bank failures, especially amongst larger banks that invested in high-risk sub-prime paper. The scope of this crisis is international in nature. Any market failure won't be absorbed by the country of origin (e.g. the US), since the risk is spread out, the implications will also be spread out. Expect to start hearing more in the next few months of a impending debt crisis, as many pension funds will impacted by the failure of these large financial firms.

Government will move to consolidate regulatory agencies (many of whom are partially at fault for the current crisis!). In some instances, as in Fannie Mae and Freddie Mac, they will attempt to nationalize portions of the market. To me, that is the most troubling outcome of this whole mess. The government is attempting to absorb all that bad debt into its own hands, but in doing so, they will be absorbing billions, maybe even trillions of dollars worth of debt. This is yet another temporary fix to a bad problem. In the final analysis, what should happen, and what will happen, is that all that bad risk, all those bad decisions that market players made during the "bubble years" will just have to be flushed out of the system. Yes, that will mean plenty of pain, more banks going under, governments struggling to deal with insolvencies, but that's how the free market works. New organizations will arise and replace those poor performers. This market has no precedent, nothing that we can compare to. This is a process of destruction and ultimately renewal within the financial and capital markets. It's survival of the fittest at work.

The two largest mortgage lenders on earth are bankrupt.  The government keeps talking about a "conservatorship," which is a word that doesn't appear in my spell checker's dictionary.

mag, it absolutely should   This is a huge potential problem but, like all government bailouts, pinning the blame for it would take months, maybe years.  Probably years, but we all know nobody's head will roll for this debacle.  The next president will be issued a roll of duct tape to keep these two afloat and seaworthy.  Why these two want the job so badly continues to mystify.  But, the stakes of the 2008 election just got higher.  Lots higher.

This scares the crap out of me.  The American taxpayer is now on the hook for trillions in mortgages.  And what we're these companies doing paying out dividends recently?  I don't think our economy has hit bottom yet.

i hope this turns out to be a good thing. i suppose if i had more faith in the government, then my confidence would be unwaivering. we shall see.