Major corporate loss is always socialized and the citizenry is always penalized for the obscene excesses and the attendant economic disasters of the wealthy classes.
It is only profit that is privatized.--Pete
By ZACHARY A. GOLDFARB, DAVID CHO and BINYAMIN APPELBAUM, Washington Post
Under the plan, engineered by Treasury Secretary Henry Paulson, the government would place the two companies under "conservatorship," a legal status akin to Chapter 11 bankruptcy. Their boards and chief executives would be fired and a government agency, the Federal Housing Finance Agency, would appoint new chief executives.
The action, which would be one of the most sweeping government interventions in private financial markets in decades, is planned for today, according to several sources.
Authorities see Fannie Mae and Freddie Mac as crucial to the recovery of the housing market. They have funded 70 percent of home loans in recent months. A reduction in their activities could send mortgage rates that ordinary home buyers pay soaring and result in a new, deeper crisis for the already reeling housing market.
Moreover, regulators are trying to prevent Fannie Mae and Freddie Mac's problems from triggering a new wave of failures among banks, which hold vast reserves of bonds and preferred shares issued by the two firms.
The administration is not expected to say how much the bailout ultimately will cost, in part because it does not know how much the Treasury will be able to ultimately sell the assets for. It could be politically uncomfortable to put a price tag on a huge bailout, only two months before the presidential election. The Congressional Budget Office said two months ago that it was impossible to say how much a bailout would cost, but estimated $25 billion based on the companies' projected losses at the time.