liongterm investor

Rescuing Frannie

By guaranteeing the debt of FNM and FRE, the (mostly sophisticated) investors that purchased this debt are held harmless from their stupid decisions. If these are private sector companies, then the equity and debt are private sector. If the company is allowed to fail, then the debt also should be allowed to fail.

If these companies are in fact really owned by the government, then buy out the equity holders at the full value they held before the housing bubble collapsed along with the debt holders.

It appears that the way that this is happening, there will be little market discipline to the "bond investors", therefore they will be willing to try again soon with some other creative financial products that the government will have to bail out.

I need to have Gross teach me how to game the system.