I’ve said so much about this Fannie and Freddie disaster I don’t really feel like adding much more until I see the actual plan (not just rumors about what is going to be in it).

However, I do have a few quick takes:

• I still feel the Congress violated the Constitution by granting the Secretary of the Treasury blank check powers of the purse.
• I have no confidence in Secretary Paulson whether that means his ridiculous stammerings about the strong dollar policy or his claims that he never intended to use the “bazooka”.
• When leading politicians like Rep. Barney Frank (D-MA) and Sen. Christopher Dodd (D-CT) suggested that the organizations were sound a few weeks ago or that somehow a bailout would not be required because they were able to raise a few billion of debt, I called bullshit.  Now I call double bullshit.  The disingenuous “calming” comments from politicians to help manage a situation are only as absurd as market participants who actually trade with confidence after believing this nonsense.
• Pimco and Bill Gross are way too involved in the GSE situation and the credit crisis.  Isn’t it a bit telling to see him run his mouth off on Thursday about what the Treasury needs to do to support him the GSEs and then refuse to comment on Friday about what he knows or what he might do if there is a bailout?  Do insider trading violations apply to these guys or is it excused because the government is directly sharing the info?
• If common and preferred shareholders take a hit in deference to people like Bill Gross, I expect to see some class action lawsuits asking some tough questions.
• Citizens should be asking serious questions about the power of foreign investors over US government finances.  I am fully supportive of their ability to invest.  However, letting those investors dictate policy has serious implications.  For decades, U.S. governments ( both Republican and Democrat) made promises to foreign investors about the implicit guarantees of this paper in exchange for pumping up US housing markets, cheap mortgages, securitized mortgage investments, and most importantly, to feed our reckless and insatiable consumer-based economy.  We made promises that we should never have made and now it’s time to make good on them.  Unfortunately, doing so puts the returns of certain investors ahead of others who may be smaller or may not have received any promises.
• Does anyone wonder whether the Naked Short Selling ban was lifted to allow for the market to take these stocks lower so the government doesn’t look like it is solely responsible for wiping out billions of equity?
• And the big elephant in the room…..Credit Default Swaps on Fannie and Freddie.  Will this be a triggering event or not?  I am still watching with interest to see whether the CDS market will ever be tested or if there will just be another tricky way to avoid exposing this “insurance” as the fraud that it is. You should read this article.

This episode is one of the worst financial disasters for this country in my lifetime.   I’ll have more to say when I see what actually happens.