8:33 AM » Paulson Begins Gradual Wind-Down of GSEs Within Conservatorship
submits: Prior to the announcement I was worried that [the Treasury] would maintain the status quo and continue to throw money at [the GSEs]… Now it appears they are fundamentally changing them, which is good. These companies are now in the process of going away. They even threw in the FHLB (via a secured lending facility) which is also a positive step as they need to go too. The first step is nationalization. Eventually they should sell them off as 10 different private companies with no more ties to the U.S. government. This is going to cost the Treasury A LOT of money, but is necessary to get them out of the mortgage market. Fannie was necessary in 1938 but not in 2008. It is going to strain the Treasuries' finances. It can also mean much higher Treasury interest rates, offsetting any narrowing of mortgage spreads. (Jim Bianco, Bianco Research, September 8, 2008) We congratulate Treasury Secretary Hank Paulson for finally acting on the advice of many in the market, including The IRA , and imposing a conservatorship on Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE). Moving a week after Labor Day is not bad timing at all and now enables us to focus on the next task, namely providing the financial resources to backstop the FDIC (see our earlier comment, "").