Treasury Secretary Hank Paulson has been putting on a full-court press in the last 24 hours, making the case for his plan to shore-up Fannie Mae and Freddie Mac.

"I would rather not be in the position of asking for extraordinary authorities to support the GSEs," Paulson said in a speech Tuesday in NYC. "But I am playing the hand that I have been dealt. There is a need to support efforts that strengthen Fannie and Freddie's ability to continue to play their important role in financing mortgages and in our capital markets more broadly."

The timing of Paulson's speech - and various and sundry media appearances - is not coincidental. This week, Congress is expected to vote on housing legislation that includes Paulson's plan, which a GAO report said is likely to cost the government $25 billion.

But $25 billion - or

...

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Wednesday that troubled mortgage giants Fannie Mae and Freddie Mac are in "no danger of failing." The Fed chief made his remarks to the House Financial Services Committee, his second day on Capitol Hill where he briefed lawmakers on the problems plaguing the economy. Bernanke appeared amid a backdrop of fading confidence in the U.S. financial system and in the national economy. The Fed and the Treasury Department on Sunday came to the rescue of mortgage giants Fannie Mae and Freddie Mac, offering to throw them a financial lifeline. The two companies hold or guarantee more than $5 trillion in mortgages - almost half of the nation's total- and are major sources of financing for the mortgage market. The Bush administration is asking Congress to temporarily increase lines of credit to Fannie and Freddie and ...

No love for these two stocks.

New eight minute video on this disaster

Even after Treasury Secretary Henry Paulson made a statement
ensuring that Fannie Mae and Freddie Mac would remain as presently
constituted to carry out their mission it was not enough to
satisfy most investors.

Both Fannie Mae and Freddie Mac hold about $5 trillion worth of
mortgage guarantees in this country, roughly about half of the
9.5 trillion mortgage debt. Their survival is paramount.

The trouble with these two companies is the latest depressing
factor in the current credit and confidence crisis that the
United States is going through at the present time. This type
of negative information is depressing for stocks and weighs on
the minds of investors. This type of mindset is similar to the
early seventies when we witnessed the last prolonged bear market.

There are no quick fixes to our current set of problems, only
trading opportunities.

We …

Today, the big news that could move commodities is not in China or the Middle East -- it's right here at home. US banks are failing and the Federal Government is going to bail out Fannie Mae and Freddie Mac. I think this has big implications for the US dollar, and not in a good way. I'll be writing more about this in Wednesday's Money and Markets. For now, here is some news of interest ... Fannie, Freddie Too Critical to Fail, Lawmakers Say A government takeover of one or both companies is among several options that have been considered by White House officials, according to a person familiar with the discussions who spoke on condition of anonymity. Senior Bush administration officials are considering placing either or both firms in a conservatorship if their problems get worse, the person said. Paulson Puts Treasury Behind Fannie Mae, Freddie Mac in Bid to Calm Market Paulson, speaking on the steps of the Treasury facing the White ...

Article Source I see much to like about this. From the New York Times: the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs.... Separately, the Federal Reserve voted on Sunday to also open a lending facility for Fannie Mae and Freddie Mac, if they need emergency capital. The two companies would be able to post their own securities as collateral. The plan calls on Congress to give the government the authority over the next two years to buy an unspecified amount of stock in the two companies. Over the same period of time, it would permit the companies to have greater access to the Treasury, by expanding the credit line that each company has from the Treasury. Each ...

Three Financial Groups In Trouble The impact of the credit crunch saw two banks and a financial and industrial group fail on Friday in three different countries in the most damaging day so far since the crisis started last August.US banking regulators on Friday swooped in to take over mortgage lender IndyMac Bancorp Inc, the second-largest bank failure in US history and the fifth bank to close this year. In Denmark the country’s central bank bailed out the Roskilde Bank after it had encountered severe liquidity strains following asset write-downs. And in London, media reports said the $A4 billion Dawnay Day financial and industrial group had become a victim of the credit crunch after talks over the weekend agreed to the appointment of administrators to some of its companies and businesses later today, and a string of asset sales. The three separate problems show that the credit crunch hasn’t gone away: ...

LOS ANGELES - IndyMac Bank’s assets were seized by federal regulators on Friday after the mortgage lender succumbed to the pressures of tighter credit, tumbling home prices and rising foreclosures. The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said. The Office of Thrift Supervision said it transferred IndyMac’s operations to the Federal Deposit Insurance Corporation because it did not think the lender could meet its depositors’ demands. IndyMac customers with funds in the bank were limited to taking out money via automated teller machines over the weekend, debit card transactions or checks, regulators said. Other bank services, such as online banking and phone banking were scheduled to be made available on Monday. “This institution failed today due to a liquidity crisis,” OTS Director John Reich said. The lender’s failure came the same day that financial markets plunged when investors tried ...

Article Source How did we get into this mess, and how do we get out of it? First, a little background: Both Freddie and Fannie were initially created by the U.S. Congress with the goal of expanding the residential mortgage market. They are for this reason referred to as "government-sponsored enterprises", or GSEs, even though both eventually were converted into private companies for which there is today no explicit government guarantee of their debt.... After a homeowner has borrowed money to buy a home, the original lender likely resold that loan to Fannie or Freddie. The GSE in turn collected some of those mortgages in a pool which was sold in the form of mortgage-backed securities (MBS) to private investors, for which the GSEs collect a fee in exchange for guaranteeing payment on the MBS. Other mortgages purchased by the GSE are held directly by the GSE for its own investment ...

Congressman Ron Paul May 30, 2008

These past few weeks have provided an unfortunate opportunity to discuss inflation. The dollar index has reached new all-time lows. The total money supply, M3, as calculated by private sources, is growing at a disturbing 17% rate. The Fed is pumping dollars into the economy at an alarming rate. Just recently the Fed announced new loan auctions totaling $100 billion. That is new money created from thin air. If these money auctions, combined with the bailout of Bear Stearns, continue to be the trend, we are in for some economic stormy weather. The explanation lies in understanding the basics of money, and why it is dangerous to give government and big banks control over it.

First, money is not wealth, in and of itself. You cannot create more wealth simply by creating more money. Wall Street bankers cry out for more liquidity,

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