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The Fed said in the plan announced Sunday it would lend to the two companies "should such lending prove necessary." Secretary Henry Paulson said the Treasury is asking Congress for quick approval of a plan to expand its line of credit to the two companies and to make an equity investment in the companies, if necessary.
Wall Street is on edge about the well-being of the companies because Fannie Mae and Freddie Mac hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States. Worries over their future led to a volatile session Friday in which the Dow Jones industrial average dipped below the 11,000 mark for the first time in about two years before paring its losses.
While the companies say they have adequate access to capital, the government's efforts to lend aid to the companies is aimed to reassure investors who have grown nervous about further fallout from the nearly year-old credit crisis. A weak housing market has eroded the value of many securities backed by now faltering mortgages. Link
The job now of the federal government is to make sure Wall Street gamblers are not "nervous".
Perhaps a government subsidy for psychological counseling would cost the country a bit less?
While American consumers are the ones who are getting stuck with the collateral damage of the Wall Street mortgage and oil commodities schemes....resulting in massive home losses, pension losses and historic energy prices.....conservative federal government Leaders rush to the side of those who orchestrated and participated in the schemes and ask them if there is anything they can do to prevent them from becoming "nervous".
But hey, it's just a "mental recession", so no worries.