High Finance again

We can now all relax. Uncle Sam has decided to bail out whoever got into hot water with all the sub-prime lending done in the last five years. AIG, Bear Stearns, Merril Lynch, Fannie Mae, Washington Mutual - you name it. The government can do it because it can either print money or issue bonds. Unfortunately, most of the bonds will be bought by foreign governments, not U.S. citizens. That's the scary part. The stock market is up so the hemlines will be going up too. It's not all gloomy news. Now, real estate has to pick up again, but builders need financing, too. It's up to the banks now. Please.

Finance for adults

Fannie Mae and Freddie Mac - remember those names. Their collective name is now mud since a rumor began to spread earlier today about Federal regulators taking them over. That move will cost common shareholders and you and me dearly. Maybe not me. Maybe my kids. If the rumors are true, the Federal budget will have to support billions of dollars in bad loans which have up to now been backed by the two giant semi-public entities. This is what happens when one is careless with someone else's money. What are the choices? There aren't any. A collapse of either or both of these giant underwriters would cause panic and start an unstoppable cascade of shareholders bailing out - like a run on a bank. Credit would get super tight. If money is not kept moving, the entire economy will grind to a halt. Perhaps we're hanging by a thread but don't yet know it. I wonder if the Chinese were wanting to cash in their chips? Or the rich Arabian sheiks? The Federal action, otherwise, appears premature. Good luck to us all.