Plan unveiled to shore up Fannie, Freddie

Wow! To think that just a month or so ago, people were saying that the worst of the credit crunch had passed. That line of thinking clearly was way too premature. Not only did the Bush Administration has ask Congress this past weekend to approve a plan that would provide a credit line of some $300 billion to the troubled GSEs and buy their stock, but the Fed now will allow both Freddie Mac and Fannie Mae to borrow at its discount window. The government's hand was forced by a $3 billion Freddie auction scheduled for today. It pretty much has to go well, given the quick-trigger feel in the markets. So the credit crunch has hit Main Street in a huge way. It's unclear as of now exactly how much all this will cost Joe and Jane Taxpayer, but it looks like there will be a price to pay. This is stunning. The real estate industry may never be the same. Critics note that for years, people have argued that the twin pillars were poorly capitalized. But the bubble mentality in real estate prevailed. Until now.

For more:
- here's the Washington Post article
- here's a Washington Post article on the two GSE's reserves

Related Article:
Fannie and Freddie, the final shoe to drop?