What We're Hearing

"Full nationalization is not an option," said Treasury secretary Timothy Geithner this morning. He was talking, of course, about Fannie Mae and Freddie Mac. As I've pointed out before, if the federal government nationalizes the two, an argument can be made that their obligations ($5.2 trillion in holdings/guarantees on MBS) now become obligations of Uncle Sam, and thus the taxpayers, which is (sort of) like a consumer with a first lien of $200,000 suddenly taking out a HELOC for $100,000 even though the first is already underwater. It would appear that both Democrats and Republicans alike are going to look at restructuring the entire housing finance system which means FHA, VA, GNMA and the FHLBs are in harm's way too. Who knows, when all is said in done, maybe good olde fashioned 'building and loans' will re-emerge. George Bailey phone home...