Bailout 2.0

We're coming up on the first anniversary of the government's bailout of Fannie Mae and Freddie Mac, the first real stirrings of the panic that would rise to a roar after Lehman Brothers fell chaotically into bankruptcy. Well, that was so much fun, Fannie is returning to the well: Fannie Seeks $10.7 Billion From Treasury After Big Loss

Fannie Mae said it will need an additional $10.7 billion from the U.S. Treasury after it posted a $14.8 billion net loss in the second quarter, as rising unemployment led more prime borrowers to default on their loans.

The latest infusion will bring the total bailout for Fannie to nearly $46 billion.

The Treasury has agreed to provide as much as $200 billion to keep Fannie Mae running, and it has pledged the same amount to its main rival, Freddie Mac. Government regulators took control of Fannie and Freddie last September.

The most annoying aspect of this is the persistence of the fiction that Fannie and Freddie are private companies. They are not. They are/were sponsored by the government and blessed with an explicit - formerly implicit - government guarantee of their obligations. They dominate the mortgage securtization market so thoroughly that they could be considered a joint monopoly and the target of anti-trust action ... if they really were private companies. They are - right now - the means by which the government's mortgage relief plan is being implemented. They are a mortgage cartel. A modern day East India Company. A harbinger for what happens when the government provides a "public option," whether for cars, health care, or mortgages.

Real financial reform would include either nationalizing and selling off the FM's or reverting them to their true state as government agencies with commensurate lower levels of pay for their employees, nee' bureaucrats. But there are too many people making money off of the fiction, and too many progressives operating a de facto housing policy under the guise of the free market, so the money pit is still in business.

In the meantime, other Big Shots are somehow making money off of their suposedly toxic assets, which have risen in value. Amazing! Especally when you consider that these were assets used as compensation! My amazement continues to amaze! Credit Suisse Bankers Beat The Odds in Toxic Pay Plan

Credit Suisse Group's novel plan to pay bankers with a brew of its own toxic bonds and corporate loans has gotten off to an unexpectedly strong start, which could put further political pressure on other Wall Street firms to change how they pay their employees.

Late Wednesday, the bank told 2,000 of its top bankers that a $5 billion fund of soured mortgages and bonds -- which it granted as a big portion of 2008 pay -- had returned 17% since January, according to people familiar with the matter.

(insert cynical "The house always wins/where are the clients' boats" comment here)