Curious Spectator

Forget the Moral Outrage: Just Restore the Mortgage Markets

I appreciate Alan's analysis of how the stakeholders play their parts in this bailout. Objectivity is lost in the emotional reaction of some comments. The question is how to make the best of a terrible situation, avoid a melt-down and minimize the damage to each party. The economy is bad and getting worse, there is less demand for housing, and mortgage default will likely continue to increase. The high priority issue at this time is not to punish the guilty but to salvage the economy. If the financial system can weather this recession, the patient saved from mortal wound, then there will be time to deal with restructure of bad systems, debate the dubious "government hands-off" ideology, punish the greedy and incompetent, restore investor confidence, etc. If the Chrysler model worked, why not see if some pieces of the past can work again? Personally I am not optimistic that cooler heads and wise mandarins can function in a politicized system very well. There are eight years of recent history to support it. However, the picture is so dire that this might just be the last chance to get the mortgage market working again. Letting it die is clearly idiotic.

Paulson Tops Gross, Greenspan and Ackman in the Mortgage Battle

Please kindly explain HOW "people like Ackman will simply bleed it back out"? And how did Ackman and others managed to make huge profits by shorting FNM and FRE in the first place? Why did the big banks and funds that own FNM/FRE equity stand aside and let it happen? What is the mechanics involved?