Paulson told Mudd he had a plan to restore confidence in Fannie and Freddie, the core of the Bush administration's efforts to revive the U.S. housing market. ``At that point, the proposal began to take form,'' Mudd, 49, said in an interview. ``We're trying to solve a crisis of confidence. Would this do it?''

The next afternoon, before financial markets opened Monday in Asia, Paulson announced the rescue plan, saying he would seek authority to buy unlimited equity stakes in the companies and their bonds if needed, while the Federal Reserve would lend directly to Fannie and Freddie. Congress included the proposals in a broader housing bill that President George W. Bush signed into law last week.

Asian investors were among the most important groups to soothe because central banks, financial institutions and funds in the region own $800 billion of Fannie Mae and Freddie Mac's $5.2 trillion in debt, according to data compiled by the Treasury. U.S. officials were concerned that sales from the region would push lending rates higher, said the people, who declined to be named because the discussions were confidential.

Confidence Building?

* How can anyone have confidence in the markets when the Fed, the SEC, or the Treasury Department has to intervene on a weekly basis?
* How can anyone have any confidence in earnings statements when level 3, market to fantasy assets rise every quarter?
* How can anyone have confidence in banks when Citigroup Holds $1.1 Trillion in Mysterious Off Balance Sheet Assets?
* How can anyone have any confidence when the FASB Postpones Off-Balance-Sheet Rules for a Year, at Citigroup's request, because "It's not practical" to implement the rules now. (Please see Not Practical To Tell The Truth for more on this story).
* How can anyone gave confidence in financial institutions when Deleveraging Risk Is High And Growing At Lehman and other broker dealers?
* How can anyone have any confidence in banks when there are 25 Rock Solid Reasons To Believe The Banking System Is Unsound.
* How can taxpayers have any confidence when Congress acts in the best interest of Fannie Mae executives, investors like Bill Gross who bet on a taxpayer funded bailout, and China, rather than the best interests of taxpayers and innocent citizens that had nothing to do with this housing mess?
* How can anyone have confidence in the system if there is even the remotest possibility that the US financial system was held hostage by China?


Fannie Mae Chief Executive Officer Daniel Mudd called Paulson's move a "confidence building measure". Mudd cannot possibly be further from the truth.

A graphic representation of our economy under these nimrods.....

But they don't get to look at the internal #s. So they're being paid $95k to deliver an opinion without access to the facts. Beautiful.