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Reality reasserts itself after Fannie & Freddie stunt...

To the surprise of nobody with more than a couple of economics brain cells to rub together, the bail-out / conservatorship / nationalisation by any other name of the US GSEs Fannie Mae and Freddie Mac offered only a temporary reprieve to the markets. Temporary, in this instance, meaning less than 48 hours. The initial misplaced euphoria from unthinking investors (and I’m deliberately excluding those canny enough to ride the index spike up and short it back down again) quickly gave way to the realisation that this act – though probably unavoidable in the grand scheme of the current crisis – does not represent the beginnings of a return to a stable world financial system. On the contrary: it highlights the mess we’re in. Think about it. The two entities that between them guarantee the mortgages of 50% of the US housing market are now effectively being supported and funded by US tax-payers....

posted on: Sep 10, 2008 | author: Alex