Speaking of naked shorting....gee wonder why the SEC is only worried about naked shorts on the major financial firms and not in the other sectors? Hmmm....

WASHINGTON (Reuters) - The Securities and Exchange Commission will issue an emergency rule later on Tuesday to stop "naked" short selling in major financial firms, including Fannie Mae and Freddie Mac, the SEC said.

Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference.

In a naked short sale, the investor sells stock that has not yet been borrowed. Sellers sometimes deliberately fail to deliver securities as part of a scheme to manipulate the stock price.

The emergency rule would require any person making a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on the settlement date.

The SEC has already proposed rules to curb naked short selling abuses and prevent market price manipulation.

Exactly. Why do they do it for Fanny and Freedy? Of course we know why.

Think of all of those thousands of companies this has already happened to and they didn't do shit about it. Think of all of the people losing their jobs and losing at least part of their 401Ks. It is disgusting how often this happens and it's pure greed with no regard to others well being. It is one thing to deal with getting laid off, it is a completely different one when your retirement savings are stolen from you.

NOT ONE person or company has ever been convicted of naked short selling to drive down prices, yet it's explicitly illegal and happens everyday. Supposedly this is what was happening to Fannie and Freddie...or so they think. So we are going to rescue them and keep profits private, but risks continue to be public. When you have loans valued at close to 4 times your debt, what is the reason the feds are opening up public funds to them again?

Of course you can't say anything about this type of thing or you become a whiner. And since Phil Gramm had nothing to do with the subprime crisis and says some really intelligent things like it won't be any big deal when people start getting laid off, he should know what a whiner sounds like.

If you have time, here is an interesting lecture on it.

Big presentation on shorting

I clicked on this last night, and if I had not been so tired I would have listened to the entire thing. Very interesting. I am in the industry and I did not know some of what was going on.

One of the things that irked me recently is that Goldman Sachs gave a short sell recommendation (which is unheard of) on Citibank (pretty sure it was Citi, could have been Wamu now that I think of it) last month. They had been shorting them for 3 months prior to that. This is market manipulation on a grand scale. Then whichever firm it was, came back and gave GS a sell rating, pretty much out of spite. (Maybe it was Wachovia, damnit now I cannot remember, but it does not really matter the Bank, it is the process that is messed up, and Goldman Sachs is considered, no pun intended, the Gold standard in investment banking)

So now that it is a done deal who is next? My money is going on the auto industry.

Fear not, the gov is making the CEO's of Fannie and Freddie step down so that should fix everything.

I went to a buddies last night to see Chuck Liddel get KTFO and his wife is a bankruptcy lawyer. Her firm is one of two that are authorized to handle cases in Georgia. They have set a record each and every month this year and their internal people don't expect it to slow down for at least another 24 months. My wife had to lay off 12 people this past week and they were begging to keep their jobs and take up to a 50% pay cut. There is a good chance there will be another layoff in early November. Also read that said 9% of homeowners are either behind on their payments or are already in foreclosure. Unemployment rate is crushing, salaries are flat, and costs are going through the roof.

Forgive me if I don't agree with all of you economic optimists.

And who's fault is it that they overextended themselves with mortgages they couldnt afford? I dont buy that very many of them were tricked by unscrupulous brokers. And you can thank Joe Biden and his MBNA cronies for about 15% of the foreclosures.

This is the first month that unemployment was higher than the average during the Clinton administration., which was already artificially low due to the tech bubble, and most likely will be adjusted downward. Oil is in freefall and may be headed to $80/bb, gasoline and heating costs will follow, and that will bring food costs down with them, since most of their increase was cost of shipping.

Forgive me if I dont agree with all of you economic doomsdayers.

I guess this is one of the benefits of living in Montana where the economic boom in real estate never inflated the prices that high. We are taking a hit to some degree especially those that built a lot of spec houses. But on the whole while the real estate market is sluggish, it's not been as bad as some of the rest of the country. I guess if you don't get a huge boom then the bust isn't as bad either. Anyway, we are probably still one of the lowest per capita income states in the union. But now at least the housing is getting more affordable again . I just hope there's someone here that will be interested in a 4 bedroom 2 bath home for $120,000 or so when we get this rental fixed up again to sell.

I less than three you for this. I have been saying this for 3 months, that it would hit that by December.

Also, eff OPEC in the A. On friday they actually came out and said that they were going to reduce supply to try and keep oil at 100/barrel. This is why the commodities markets are b.s.

We have a meeting tomorrow with one of the big institutional investment advisers. It will be interesting to hear their view on the takeovers and oil/energy.

Hopefully if oil does get below 100 demand doesnt pick up and hopefully neither party takes their eye off the ball on drilling/alternatives. We should be able to learn from the repeated mistakes of the past, and just the vigor of the discussion has helped put downward pressure on prices.

PM me what you here please.

I'll repeat it here, since its of general interest in the thread.

Their basic points were:

1) "Bail out" is an inappropriate word. The government always implicitly backed the FM's derivative securities and directly owned loans. this action just explicitly recognized that obligation, and was done mainly to mollify foreign governments holding FM derivatives by taking over the management of the process.
2) The cost to the tax payer will be minimized by restoring confidence and liquidity to the markets, increasing home values and reducing the FMs exposure.
3) The spread between FM obligations and US Treasuries is a big short term opportunity, and once the markets price in the new explicit guarantees the value of those obligations will increase signficantly.
4) Despite the drop in oil prices they are concerned about inflation in the near term and are encouraging the Trustees to consider investments that respond well in an inflationary environment and increasing the funds leverage.
5)They expect the dollar to do well and Europe to respond to liquidity in the US positively and recommended shifting from the bottom to the top of the allocation for international equities.

Those were the main points, if I remember any others I'll post them here and PM you.

Wow...are we finally going to stay out of something and let Lehman declare insolvency? Sounds like it might actually happen.

I am not much of a Greenspan fan, but he didn't have too kind of words to say today:

The U.S. credit squeeze has brought on a "once-in-a-century" financial crisis that is likely to claim more big firms before it eases




I need someone of greater intelligence to explain this to me.

Greenspan, who left office in 2006, said he expected more failures before the crisis eases. While regulators "shouldn't try to protect every single institution," he said, companies should be kept from failing "in a sharply disruptive manner" to prevent further shocks.



Why do they have to fail to be a shock? I mean, why wouldn't a bailout be considered a shock? Passing a shit sandwich from company to company can only go on for so long before someone has to eat it.

the L word.
Liquidity.

FNMA and FRE stockholders did not get bailed out and the US didnt pick any obligations it didnt already have. If the biggest market maker for loans were to disappear, leaving their bondholders nothing and some administrator to deal with their directly held loans you would see something approaching the great depression as the dominos start to fall.

LEH on the other hand impacts primarily their own shareholders and the liquidation wont have the feedback effect that FNMA and FRE would.

"During emergency meetings between federal officials and investment bank executives over the weekend, SEC Chairman Christopher Cox indicated to the bankers that the agency plans in a few days to impose new protections against abusive "naked" short-selling, a person familiar with the matter said Monday"

I have a question for probably Cope or anyone else in that business. I have my IRA in a particular company and was wondering how do you tell if that company is stable and not going to fail like some of the giants that have in the past few days & weeks? And if I was to move it (because of distance logistics, not fear) how can I tell which company is secure to move it to? It's become a concern to me because that's our one safety net left should something go horribly wrong with my husband's health. If we lose that then we really could be in shit city.

If it is with a bigger firm it should be covered by SIPC insurance up to $500,000. So it should not be a big concern of yours. Take Merrill Lynch for instance, a huge firm bought up by BAC. All investable assets are fine, just another firm will be the holding company. 99% of the time that is what would happen. If your money is in ABC mutual fund, but held at charles schwab, you still own the mutual fund, even if schawb fails.

Hope that helps.

Thank El, that does ease my mind some. Unless of course inflation goes through the roof. But then nothing would help anyway,lol.

A more balanced portfolio with a healthy share of TIPS might ease your inflation concerns somewhat. You can lower your nominal return risk and add some inflation risk protection at the same time (at the cost of potential nominal return, but it sounds like your not in a position for a lot of risk anyway.

Care to share what firm your money is held at?

Sorry to be somewhat ignorant where some of this is concerned but what is TIPS? I don't speak acronym very well. Now I do have some of my IRA invested in a fairly large regional bank here in the Rockies. Haven't heard anything that there's any problems with them but I still have concern that it might go like Lehman Bros and blow up overnight. I've pretty much diversified over a fair amount of industries but the bank is one of my "larger" holdings. Until now I always figured that banks were pretty safe investments.

Treasury Inflation Protected Securities. Basically short term government notes.


Your banking institution, has nothing to do with your IRA money, as long as it is invested in securities or debt instruments that are not of that particular bank.

Just to expand on this, the core Rate of Return is somewhat lower than on other Treasuries but you get an added principal adjustment for inflation.

Thank you both. I'll check into them.

It looks like they are at least adjusting some numbers.

Government data Friday showed retail sales fell 0.3 percent in August, while July’s decline was revised downward from 0.1 percent to 0.5 percent. Even more worries, the August decline came despite a sharp drop in gasoline prices and follows up on a weak showing in the second-quarter GDP report

Should we be concerned? Sorry to Cope and El but this doesn't sound too good.

Top Economist: Americans Should Worry About Bank Deposits if Congress Doesn't Act
Posted Sep 15, 2008 12:58pm EDT by Aaron Task in Investing, Recession, Banking
Related: LEH, MER, BAC, AIG, WM, ^DJI, ^GSPC
Updated from 12:58 p.m. EDT

With the "financial storm of the century" hitting financial institutions, many Americans are worried about the safety of their bank deposits. While the FDIC insures individual accounts up to $100,000, the reaction to IndyMac's failure this summer -- lines outside retail branches -- shows Americans have limited faith in the Federal Deposit Insurance Corp., which guarantees individual accounts up to $100,000.

Update: "The banking system is safe and sound," Treasury Secretary Hank Paulson declared at a mid-afternoon press conference Monday, seeking to ameliorate such concerns.

"Nothing is more important than the stability and orderliness of our financial markets [and] regulators remain vigilant," Paulson continued. "We're working through a difficult period in our financial markets right now as we work of some of the past excesses, but the American people can remain confident in the soundness and resilience of our financial system."

But Americans are justified to be worried, says Nouriel Roubini, of NYU's Stern School and RGE Monitor, who notes there is already a "slow-motion run on retail banks" occurring nationwide.

That "run" could accelerate as people realize the FDIC fund has about $50 billion to "insure" about $1 trillion in assets at the nation's financial institutions, says Roubini. "They're going to run out of money" unless Congress acts soon to recapitalize the FDIC.

In addition, the recent spike in number of banks on the FDIC's "troubled list" is only through June, meaning even that inflated number understates the problem.

The intent here isn't to add to people's anxieties, but Roubini is one of the few market watchers to correctly predict the severity of this ongoing credit crisis. If nothing else, he says people with accounts exceeding $100,000 in value should spread their money - and the risk - among different firms.

Sounds like the Fed is not going to let AIG fail. Many options on the table per dealmaker.

1. Officials at the Treasury Department are considering a government takeover of AIG, possibly placing the company into a 'conservatorship' as occurred with Fannie Mae and Freddie Mac, according to a person familiar with the thinking at the Treasury. There may be considerable legal obstacles to such a takeover, as it is not clear even to Treasury officials what the authority for such a takeover might be.

It is far from certain that this plan will come to fruition, according to the source. The questionable legal authority for the move may make a Fed loan more likely. The discussions at the Federal Reserve and the Treasury are ongoing. In fact, it seems as if many of those involved with the discussions are floating rumors about the discussions, perhaps hoping the market reaction could influence the outcome.

2. Bloomberg is reporting that the Federal Reserve appears to be cracking in its resolve not to bailout AIG. The Fed is considering extending a "loan package" according to a person familiar with the negotiations.

There was never any intention to let AIG fail. That was simply strong talk to try to get AIG to find alternatives. Just another company too big to fail.

Hey, I have an idea. Let's keep throwing good money at bad and make the problem even bigger. That way when the explosion happens it is muy bonita and lights up the entire sky. Maybe we can get the ones that burst into stars and hearts and all those pretty shapes!

Does anyone really believe the housing market is going to reverse the downward trend anytime soon? Aren't a crap load of alt-A loans about the reset?

Whats the latest on AIG?

Housing is turning around already in some spots due to low interest rates, but its 6 months to a year before an overall bottom is hit. (All bets are off if Obama raises taxes).

One year adjustables are post credit tightening. Problems with 2 and 3 year adjustables depend on the terms. General mortgage rates are about the same or lower than 2 and 3 years ago, but I dont know what the teasers were back then.

edit: nm, thats not what you were asking.

Washington Mutual buyout next?

The US government is attempting to organize a buyout of battered Washington Mutual (WM), the New York Post reports.

The sticking point: "No one knows what's in their books," the newspaper said, quoting an unnamed person.

Citing anonymous sources, the New York Post says federal regulators have had discussions with several banks, including Wells Fargo (WFC), JPMorgan Chase (JPM) and HSBC Holdings (HBC). However, the newspaper said that no discussions of a deal between the banks and Washington Mutual are underway.

Washington Mutual has lost about 80% of its value this year amid concerns about its loan practices and growing losses.

In the second quarter, Washington Mutual lost $3.33 billion, or $6.58 a share. The bank set aside about $8 billion to cover bad loans in its mortgage portfolio.

Washington Mutual said loans valued at $2.17 billion weren't being repaid in the second quarter. The bank's non-performing assets rose to 3.62% of total assets in the second quarter from 2.87% in the first quarter.

However, Standard & Poor's says the bank can meet its immediate obligations. Nevertheless, S&P cut WaMu's credit rating to "junk" status, or below investing grade.

Earlier this month, Washington Mutual named Alan H. Fishman CEO, replacing Kerry Killinger. Killinger became WaMu's CEO in 1990 and built the Seattle-based thrift into one of the nation's largest banks.

"The Federal Reserve and the Bush administration believe the threat of defaults by A.I.G. on a lot of unregulated derivative contracts creates a national emergency. It’s too bad they didn’t think of that when they were opposing any efforts to regulate those markets. That would have been interfering with free enterprise. This move, somehow, is not.

The official line is also that taxpayer money is not being put at risk, since the $85 billion loan is well collateralized. No group of banks was willing to make such a loan, so you have to wonder if the collateral is really that good. And the government will not say if it will loan more should that be needed to keep A.I.G. from collapsing.

It was said that only a conservative anti-communist such as Richard Nixon could overcome domestic opposition to talking to what was then called Red China. Perhaps something similar is at work here. Can you imagine what conservatives would say if a liberal Democrat had moved to nationalize major financial companies?"




"That, and the fact that unlike with Lehman — where the possibility of failure was openly discussed for months and to a certain extent planned for — federal officials and market participants don't seem to have really focused on AIG's problems until this week. As with all U.S. insurers, the company is regulated not by the Feds but by a state regulator, in this case New York insurance superintendent Eric Dinallo. Plus, it was awfully hard for outsiders — and even insiders — to understand the gravity of the company's problems. "You can read through every financial statement in the world and have absolutely no clue as to the risks they are taking," says Leo Tilman, a former Bear Stearns strategist who now runs the advisory firm L.M.Tilman & Co.

The particular risks that brought the company to the brink of bankruptcy seem to lie not with its core insurance businesses but with derivatives-trading subsidiary AIG Financial Products. AIG FP, as it's called, merits a mere paragraph in the nine-page description of the company's businesses in its most recent annual report. But it's a huge player in the new and mysterious business of credit default swaps, derivative securities that allow banks, hedge funds and other financial players to insure against loans gone bad.

AIG generally sells credit default swaps, thus promising to insure others against defaults. It's a great business when defaults are low; when they rise it can turn toxic. AIG FP lost more than $10 billion in 2007, and $14.7 billion in the first six months of this year. That, along with losses in other investment portfolios, have cut deeply into the parent company's capital reserves. The credit default swap contracts decree that if AIG's credit rating drops below a certain level it has to fork over $13 billion in collateral to the buyers of the swaps. Monday night, because of the losses at AIG FP and in the AIG's investment portfolios, Moody's and S&P cut the company's ratings. After that the consensus was that the company could only survive another day or two.

"Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression," wrote money manager Michael Lewitt in Tuesday morning's New York Times."

A friend of mine said it better than I could. Hope I can quote the basics of what he told me.
When anyone with a brain could see that those subprime loans were bound to have a high default rate, AIG insured them against default anyway? Now, that just seems plumb weird. Again, when nearly any local bank would quickly tell you that the default rate with the sub-prime loans was likely to be high, that anyone would issue such policies seems peculiar. I thought that Insurance companies used actuaries and cold data to measure risk. But, as an article I read in Time states, business was GREAT, as long as the default rate was low!!! Apparently, too great to consider the other possibility would occur, so the actuaries either never gave a risk analysis, or were ignored. I can't believe that any legitimate actuary would ignore the huge risk factor.

I don't know much else about the situation, and hold any opinion of my own with little regard. But, for crying out loud, this has every indication of being short-term psychosis: accepting a short term stock boost with reckless disregard for long-term risk. I mean, I understand AIG was probably surprised by the speed and severity of the defaults, but they had to know it was coming, eventually. I'm willing to bet that there are some AIG execs who were dumping their stock options and planning their exit when events overtook them.

I feel for the shareholders, really. I reckon they probably could have asked a few more questions about the operations, or investigate just how the stock was appreciating more carefully. But, in fact, not many shareholders ever question short-term succsess.

If, as I've said, BUYING high-risk paper is stupid, imagine just how stupid you are to insure the holders against default. They are NOT that stupid. This just looks like basic piracy by the execs.

It's definitely the fault of these guys.

It was a financial subsidiary, not the insurance arm.

I stand by my statement, actuaries are responsible for everything negative that happens with the economy.

be careful or i'll tell you the date and cause of your death

A financial subsidairy that happened to be insuring mortgages against default but not having any overseeing them and recognizing the risk involved? Sounds like a crazy way to run a company to me. And I've been doing some further reading on the subject and it's pretty sleezy. How about the offers that were already on the floor for AIG before they negotiated the deal with the feds. Watching an economist on PBS this evening, he said that the first AIG people to get to the feds began the lamentation of how badly their failure would affect the general American and world finances. It stuck, when in fact, only one of the AIG arms of four was actually in trouble, and there were viable alternatives to fed help. Furthermore, their assets were sustainable in the other three aspects of the company, but they thought they could get a better deal with the feds. Similarly, analysts were saying the same thing about Freddi and Fannie, that their negotiable assets far outweighed their overall debt, and the recommendation was that they should be sold, not bailed out. It seems that there was a fair amount of fearmongering to prevent the companies and their upper staffs from losing THEIR investments, though the stockholders have lost virtually everything.

So then the treasury will be investing 200 billion into a good, viable product that will return them 7+ percent?

Oh, lordy, no. Not to mention if the upper staff had stock, they lose as well.

Not to mention, Freddie and Fannies stock has been going down for awhile now. If you lost your ass you ain't monitoring your accounts the way you should be.

not to mention that the Federal government always had an obligation to back those bonds. The prinicipal thing thats change is the stockholders losing their investments and the government taking direct control of their obligation, which it always should have had.

and lets not forget who conributed >$500000 to Obama and who two of his senior advisors are.

"Not that the Associated Press mentions that Franklin Raines, who fled Fannie Mae in the shadow of a $6.3 billion accounting scandal, is now a housing policy adviser to Barack Obama.

WASHINGTON - The former Fannie Mae accountant who raised questions about the mortgage giant’s bookkeeping said Wednesday that he took his concerns directly to chief executive Franklin Raines in 2002 and asked him to investigate.

The disclosure by Roger Barnes, who left Fannie Mae last November, came as Raines and chief financial officer Timothy Howard defended the company’s accounting and told Congress that regulators’ allegations of earnings manipulation represent an interpretation of complex rules.

The regulators have said that information provided by Barnes was important to their investigation of the government-sponsored company’s accounting."


_____________________________________________________________________



James A. Johnson, former Fannie Mae CEO and consummate Washington insider, is leading Sen. Barack Obama's vice-presidential search process. He just conducted an early round of interviews on Capitol Hill today. But Johnson also is proving a ripe target for Republicans looking to spot hypocrisy in Obama's pledge to reject business as usual in Washington.

The Wall Street Journal reported Saturday that Johnson had received mortgages worth more than $7 million from beleaguered lender Countrywide Financial, including at least two loans below market average. The article noted that the transactions may have been perfectly aboveboard -- but several could prove too cozy, depending on how much they overlapped with Johnson's Fannie Mae tenure.

______________________________________________________________________

and his ties to Wall Street go much deeper.

this Change is counted in the millions

Ken Lay was a 'buddy' of the right, I heard his name every day and they even went after him.


I haven't heard the name of the guys on these deals, but I've read numerous times they were big Dems supporters.

What am I missing?

Actually the AIG loan from the fed is the treasury rate +8.5%. So roughly 11.5% right now. Not a bad RoR. And from what I understand is they are doing this now to salvage what is there, then sell off the profitable arms and dismantle AIG. One sector of AIG, that was trading CDS's (Credit Default Swaps) got leveraged too much because people assumed CDS's were safer than they are, and they got downgraded and had to come up with capital to cover their new default risk, not that they were actually defaulting. So it is a little misleading when you just read headlines. AIG has some very profitable pieces, and those will be cleaned up and auctioned off. Most likely the reason they did not want the Holding Co. to be able to get a bridge loan from their profitable pieces and bring them down too.

I was more looking at the FRE/FNM situation, I don't even remember what those numbers were, but I know it was the right to inject cash in the form of buying senior preffereds at 7+ percent. The AIG deal looks like it may be just as decent, I hadn't really looked at it yet.

I guess my comment was to try and draw attention to the idea that these moves could actually end up being very profitable for our Government over time, especially if you factor in a timely reasonable rise in real estate values. Some people on this board, while I believe have the ability to see another side to an issue, well, I just don't think they are hearing it.

Nothing. I hold no hopes for Dems to actually show any semblance of fairness in these matters. The fact that Obama is number two in line for monies from FRE/FNM has not been said in any shape or form by any MSM. There are so many ties at so many levels on the left that if McCain doesn't own them on this it's his own fault.

You know, Rush asked an interesting question: When did Obama make his money?

In the Bush years.

The question in and of itself is pretty simplistic but it's interesting when you look at the differences in what he does with it. Nowhere close to the charitable donations that McCain makes for example. So, he made quite a bit, obviously thinks he made to much and should have gave back... but didn't? All talk and no action.

That is the other thing people don't get about the FNM/FRM situation, first this relationship has been established for a long time, they didn't just hand over money, they bought preferred stock in the company increasing their ownership stake, wich provides additional funding to cover their losses until the ship rights itself. Assuming they can turn around the two mortgage giants, then the government will get every dime back + interest at better rates than they currently make on the majority of their funds.

Whoa...a semi-profitable move by the government?

Is this the first horseman?

Notice how nobody thought this was a good risk with his own money, but the Feds are happy to do it with our children's money.

1st. The feds already had that system in place. That argument does not work for FNM/FRM. Plus individual private institutions would have had to pooled resources and would have taken some time to get it together.

2nd. Would it be better to let them fail (not sure if they would have) and let our entire economic system and global economy go into decades of disarray?

3rd. For AIG I can see your logic, but they had asked special permission for one Arm of AIG (the arms that did the CDS's) to borrow 20-40 billion from their profitable arms (insurance & financial services to name two). AIG as a holding company, by law, has to keep those assets separate. So the governement said no, besides being illegal they did it, because they did not want one arm of a multinational holding company to take down the entire ship. This was they can fix it up and sell of the pieces. Warren Buffet has already made a play for the Airline Insurance piece.

[quote name='El Guapo' post='2797307' date='Thursday, September 18th, 2008, 8:30 PM']1st. The feds already had that system in place. That argument does not work for FNM/FRM.[/quote]
Absolute's insiders had a similar system in place in case they needed some money in the future.
[quote]
2nd. Would it be better to let them fail (not sure if they would have) and let our entire economic system and global economy go into decades of disarray?
[/quote]I don't think that would happen.
[quote]
3rd. For AIG I can see your logic, but they had asked special permission for one Arm of AIG (the arms that did the CDS's) to borrow 20-40 billion from their profitable arms (insurance & financial services to name two). AIG as a holding company, by law, has to keep those assets separate. So the governement said no, besides being illegal they did it, because they did not want one arm of a multinational holding company to take down the entire ship. This was they can fix it up and sell of the pieces. Warren Buffet has already made a play for the Airline Insurance piece.[/quote]
I'm not smart enough to understand this part, so I'll assume you're right.



[/quote]

The wealth of the vast majority of Americans is concentrated in their home equity. The largest amount of income spent outside of mortgages, food and cars are on home maintenence and improvement (and it may have grown to be more than spent on cars during the bubble). Let home equity go down the toilet and the economy follows right behind.

Freddie and Fannie used huge lobbying budgets and political contributions to keep regulators off their backs.

A group called the Center for Responsive Politics keeps track of which politicians get Fannie and Freddie political contributions. The top three U.S. senators getting big Fannie and Freddie political bucks were Democrats and No. 2 is Sen. Barack Obama.

Now remember, he's only been in the Senate four years, but he still managed to grab the No. 2 spot ahead of John Kerry — decades in the Senate — and Chris Dodd, who is chairman of the Senate Banking Committee.

Fannie and Freddie have been creations of the congressional Democrats and the Clinton White House, designed to make mortgages available to more people and, as it turns out, some people who couldn't afford them.

Fannie and Freddie have also been places for big Washington Democrats to go to work in the semi-private sector and pocket millions. The Clinton administration's White House Budget Director Franklin Raines ran Fannie and collected $50 million. Jamie Gorelick — Clinton Justice Department official — worked for Fannie and took home $26 million. Big Democrat Jim Johnson, recently on Obama's VP search committee, has hauled in millions from his Fannie Mae CEO job.

Now remember: Obama's ads and stump speeches attack McCain and Republican policies for the current financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain — Sen. Obama — was at the head of the line when the piggies lined up at the Fannie and Freddie trough for campaign bucks.

Sen. Barack Obama: No. 2 on the Fannie/Freddie list of favored politicians after just four short years in the Senate