kahunabear

What Kind of Government Support Will Fannie and Freddie Get?

Risky asset prices need to collapse, not be subsidized by more Bernanke bucks.

Neither the stockholders or bond holders should be bailed out. The bonds have no guarantee. And if it is "implied", it shouldn't be.

The very best thing for the mortgage market is to let the buyers of the bonds feel the pain of taking on risky mortgage backed securities. Thisis the only way to prevent this rapant "risk free" speculation in the future. Letting the bond holders earn a return in line with the return that the actual mortgages produce will cause future mortgages and mortgage bonds to be priced appropriately by the market.

Otherwise, we will end up right back in another bubble where the robber barrons rape the taxpayer by taking ridiculous risks to line their pocket books knowing they can pawn off any losses to the masses.

This is exactly what is wrong with American crony capitalisim. Alas, my idea will never happen. We are doomed to a future of pillaging and will eventually end up as a Banana Republic. Oil, gold and commodities are proving to be a much more reliable currency and store of value than the buck. They aren't making any more oil or gold. On the other hand, their is an unlimitled supply of Bernanke bucks.