Don't Call It A Bailout

Just a helpful action that will cost taxpayers $25 billion dollars.

July 22 (Bloomberg) -- Treasury Secretary Henry Paulson's rescue package for Fannie Mae and Freddie Mac will probably cost $25 billion, the Congressional Budget Office said.

"There is a significant chance -- probably better than 50 percent -- that the proposed new Treasury authority would not be used before it expired at the end of December 2009,'' the nonpartisan agency, which provides economic and budget analysis for lawmakers, said in a report today.

I don't have a complete problem with a bailout that helps shield homeowners from foreclosure. A bailout that shields investors and executives from the consequences of their decisions is the problem.

On a related note, this is a very interesting speculative article about that other recipient of a federal bailout, Bear Stearns. I'm not sure I totally buy this, but there's an implication that the firm fell victim to a surge of short-sellers that drove their stock price into oblivion. The larger point here is that the financial business is so complicated that this becomes plausible, and the ostensible reason for the attack was that Bear was keeping above water in the credit crunch, so it all goes back to the same source.