'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Saturday, September 06, 2008

Fannie Mae and Freddie Mac: The Biggest Bailout in History? 

According to Mr. Mortgage, if the federal government retroactively guarantees debt issued by Fannie Mae and Freddie Mac, it could increase the federal debt from approximately just over 9 trillion to as much as 14 trillion dollars. Preliminary news reports indicate that some sort of taxpayer guarantee is being proposed, but the extent of it is unknown.

The consequences for the value of US treasuries, the global reserve currency, could be significant. Inflation and a substantial decline in the standard of living in the US just over the horizon? I will try to post updates on this story next week, one of the most important economic events of the last 50 years, as time permits, with links to analysis by Mr. Mortgage and Calculated Risk. CR anticipates that the details of the plan will be leaked on Sunday afternoon.

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