OK, duplicate thread because I think this topic deserves its own thread. This is a long read, but worth every second of your time.

Paulson is all over the TV today, announcing he's "confident" that Congress will give him the authority he needs to sell Fannie and Freddie to the taxpayers.

Of ALL the damaging moves government has made and is considering, this is, by far, the worst. And the most costly. To you and me.

Please take the time to read Karl's ticker, linked below. And please, also take the time to read his letter to Congressional leaders and others, and the petition.

If we let this happen, there's no turning back, and the carnage will be immense. There is no more important issue on the table right now.

Ticker Forum

I agree with allowing the companies to fail. However, I also think it's a bit of a pay me now or pay me later kind of thing.

If Fannie and Freddie are allowed to fail, it will immediately halt the mortgage industry - even moreso than it is today. Housing values will fall probably another 10-15% instantly - which will throw a bunch more houses into default, which will probably sink a bunch more banks - pay me now.

If they are not allowed to fail - we'll be paying for the next 20 years or so - the economic recovery will be very slow. - pay me later.

Fannie and Freddie have already 'failed'. The question on the table is who will pick up the tab. Paulson and company would like it to be YOU. My strong preference is that the tab be paid by those who put up the risk capital.

The owners of Fannie and Freddie bonds have been paid a significant premium for the risk capital. Bailing out the investors on the backs of taxpayers is not only bad policy, it turns the concept of capitalism on its head.

Housing prices will continue to collapse irrespective of the health of the GSEs. When prices have 'recovered' their historically supportable level, eg 2.5 - 3X income, they will level off.

Banks will fail. Do you think it appropriate that we use taxpayer money to bail them out, too?

I'm not disagreeing with you.

Just saying there will be a cost either way.

I personally think the cost should be borne by the investors and creditors, not the general public. Eventually the investors will find a way to pass it on to the public, but I like my "pay me now" scenario which causes the costs to hit immediately and filter into the public over time, vs "pay me later" which will be a very large debt for the taxpayers.