Hold on to your hats! (and wallets)The New York Times is reporting that senior Bush administration officials are mulling over their options for an emergency takeover of the battered “linchpin” government sponsored enterprises (GSE) of Fannie Mae and Freddie Mac.
They’re plan would see both GSEs placed into a “conservatorship”, whereby the U.S. taxpayer would, in a sense, become the “conservator” or “guardian” of these two multi-trillion dollar delinquent wards.
As the NYT piece points out, under this relationship both the GSEs would effectively be worthless and the U.S. taxpayer would be left holding the bag for any losses on mortgages they owned or guaranteed.
Now THAT’S a BAILOUT!
Regular readers of PaperEconomy will surely not find this outcome surprising but the pace at which things are deteriorating is truly astounding.
The wheels are coming off of the cart for Fannie Freddie and as there is clearly no simple solution, prepare to watch a once in a lifetime drama of epic proportions.
