Government will buy $40 billion/month of trash-mortage bonds through Fannie/Freddie...

[Eric J in MN]

...in addition to whatever percentage of the $700 billion in the bailout bill will be used for trash-mortgage bonds.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDjJYMSphyM0&refer=home

Oct. 11 (Bloomberg) -- Federal regulators directed Fannie Mae and Freddie Mac to start purchasing $40 billion a month of underperforming mortgage bonds as the Bush administration expands its options to buy troubled financial assets and resuscitate the U.S. economy, according to three people briefed about the plan.

Fannie and Freddie began notifying bond traders last week that each company needs to buy $20 billion a month in mostly subprime, Alt-A and non-performing prime mortgage securities, according to the people, who asked not to be identified because the plans are confidential. The purchases would be separate from the U.S. Treasury's $700 billion Troubled Asset Relief Program.

The Federal Housing Finance Agency, which placed the two companies in conservatorship on Sept. 7, directed them last month to start increasing their purchases of loans and mortgage-backed securities as the Treasury seeks to absorb underperforming and illiquid assets from financial companies.

...Adding underperforming assets to Fannie and Freddie's combined $1.52 trillion mortgage portfolios would come at a time when the two mortgage-finance companies already hold as much as $210 billion of bad debt that may be eligible itself for the Treasury's relief program, their regulator said Oct. 5.

Corporations which made bad investments now have two ways they can get cash-for-trash: through Fannie/Freddie or through the bailout bill's Treasury TARP program.

[Poseidan]

1. such a pile of shit

Why not buy good mortgages and reinstate regulations? Wouldn't that free the capital needed to continue lending, and enable the assface companies to deal with their bad debts? The companies did function at some point, in some profitable capacity, correct? Why not go back to that model?

[fasttense]

2. Hmm, right before Chile finally got Democracy back, the corporations turned their debt over to the

the government. Seems that is what is happening now - privatizing the massive debt of corporations cause they are just too big to fail. We will have to pay back the debt of Goldman Sachs and the other Corporate thieves. This is also what Herbert Hoover tried to do as the depression hit. It didn't help Chile any more then the US in the 1930s, it ain't going to help us any now either.

These "free" market idiots only have 3 answers for any economic situation - 1, Cut taxes on the uber rich. 2. Privatize (which is what they are doing only in reverse with the corporate debt). 3. Deregulate.

Until America shores up the legs of the economy - the middle class - nothing is going to improve. Taking on the debt of the massive corporations is like polishing the table top of a rickety table. Unless you fix the legs, the table may look pretty but it is practically useless.

[Eric J in MN]

3. Good analogy. I'd like a policy aimed at increasing US factories...

...which sell products abroad, thereby decreasing the trade-deficit, as a way to get the economic fundamentals in order.