Well, all you taxpayers out there,  thanks to Mr Bernanke, you’re in the mortgage business now. You’ve just inherited the Fannie Mae and Freddie Mac debts, totalling about $5 trillion, roughly equivalent to the current net Treasury debt. Now you did get some assets, the mortgages that went along with the debt. Unfortunately, the Fannie and Freddie automated underwriting systems were full of holes to start with, and of course the collateral is declining in value on a daily basis. So good luck with that. Oh, and by the way, Fannie and Freddie don’t have any capital worth speaking of in relation to their debts (about 1%) so there’s nothing there.

At one level, these bailouts are OK. After all, I want to get paid. The problem I have is that the burdens are being shifted onto the taxpayer without any consequences for those who caused the problems. There will only be learning if there are consequences. What Mr Bernanke is doing is creating so-called moral hazard. If there is no punishment for crime, people will commit crimes because the risk-reward motivates them to do so. Here the taxpayers are paying the bills while the Wall Street folks who did this, including, but not limited to, Mr Potato Head, are off living it up in the Hamptons without a care in the world.

Edit: After the close the Fed issues a denial of the news that the GSEs are being permitted access to the discount window. Solid bet that no-one will be pursued by the SEC for that little piece of market manipulation.

Edit: Good backgrounder in the NYT on how Fannie and Freddie exploited Washington corruption.