The US government makes my blood boil

The latest bailout of Fannie Mae and Freddie Mac was necessary. Not desirable but necessary. In the event of a failure of two mortgage giants, we surely would bigger issues to worry about than if the United States can be considered a capitalist society anymore. The financial system would literally be defuct and locked up. ATMs might not dispense cash anymore because the banks are so intertwined that a failure of the morgage giants could bring everybody down.

The problem with this mess is not that the US government is bailing out these quasi-public/private entities, it is that there is no restriction during the good times of investment. When times were good, investment banks large leveraged bets that were of a high risk nature. Their bets were so big and so leveraged that when the trade goes wrong, they bring down the counterparty of the trade because they cannot make payment, and thus a chain reaction ensues.

What is interesting about the situation is that only the big boys get the federal golden parachute. The 19 biggest investment banks received access to the federal reserve's discount window. In essense they are allowed to borrow at the discount rate and use their piece of shit subprime mortgages as collateral.

The mass selloff of these mortgages brought down the value of mortgages of all qualities. This left smaller mortgage lenders, some of which only dealt with "superprime" AAA mortgages scrabling to cover their margin with no access to capital. Can they borrow from the Fed? No. Thornburg Mortgage (TMA), a mortgage lender that only deals in superprime lending owns $31 billion in assets yet their shares now trade for $0.33 and have a market cap of $127 million due to margin calls. They have no access to cash from the Fed because they aren't the big 19 who have lobbyists. Just unfair and uncapitalistic.

http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=11751139