IT'S ALWAYS DARKEST...

...just before the lights go out.

The Suit made it very clear yesterday. The issue of Fannie and Freddie is to be delta with as a cover your ass exercise on behalf of the administration and their minions in the congress, full stop. I will say one thing for this mob: when they want to co-ordinate things they can from time to time do a beautiful job. There was Barney on, of all places, Neil Cavuto's show on Fox yesterday, smiling and making nice to everybody while absolving himself from anything that he might have done post 2004 to contribute to the situation in which we find ourselves. Fan and Fred will not be saved; in fat, they have already been resolved. Never again will we see their like. It was a flawed idea from the start. So far, so good. Right? Until one looks at what The Suit and Barney are really saying.

To these guys, the problem was entirely one of structure; the GSAs were doomed to fail because of the duality of "ownership" and "sponsorship" that created structural failures. The solution is therefore simple: change the structure so that the "sponsorship" part is removed and what is put in its place is a direct and unambiguous support plan (guarantee) from the federal government for all future activities in the real estate sector.

Now Barney is a clever guy. He even threw in stuff like, "I was never one who believed everyone should own a home," which is of course crap as all of his policies were based on the fact that minorities were discriminated against in home ownership witness sub-prime and Alt A allowances in his oversight function--especially AFTER 2004. But let us put this aside. Barney also put forward the companion idea that property RENTAL should be financed, be it single family or multiple dwellings although no details were provided. What a guy. And to top it off Barney said his committee and that of Chris the Crook never got around to Fan and Fred in the Fi Reg bill because "you need something to replace them before you throw them out."

Bill Gross at Pimco chipped in today with his thoughts saying (threatening?) that he was done with mortgage financing unless he got guaranteed and even then a 30% down payment would be required. Helpful

There is a common theme here so much so that I suspect the menu has bee decided and the meal pretty much cooked. All that is needed is a conversation as to what condiments need be served in order to make this stew more palatable to the guests at the table. Barney, The Suit and especially The Leader for purely political reasons and Gross for purely selfish reasons will demand heavy government involvement in any real estate financing in the future. Ok, so now we know where this party is going. Problem is there will be, if these guys get their way, no real discussion of what role government involvement in the past played in the creation of this mess in the first place. The pols will not allow that and here I am not singling out The Leader and his party; the loyal opposition seems to want no part of this sort of examination either. What will that mean and what are the implications o such a result? Stay tuned...but first I have to figure this out for my self. Back tomorrow...Oh, G.M just filed their S-1? Do they still call it that? We'll talk about that as well.