Announcement: Treasury and Fed Merge with Fannie and Freddie. New Entities to be Called Treasury Mae and Feddie Mac

I am really considering this as a merger of equals between the GSEs and the Federal Government, rather than a takeover. They have approximately the same amount of debt and, arguably, the GSEs are better run: they only recently began generating losses.

Heretofore, it will be Treasury Mae and Feddie Mac run by their respective bureaucrats Hammerin' Hank and Helicopter Ben.

Here is this a.m.'s NY Times article on the subject by Gretchen Morgenson. It begins to lay the legal groundwork for Treasury Mae's action: the companies were stretching the truth about their capital position (something the shorts have been saying publicly for a year, so to this is just an excuse). The article actually implies holders of the common and the preferred will suffer, which contradicts yesterday's leaks. I don't see how the common keeps any value if the preferred suffer. More fodder for lawsuits if they decided to ignore seniority and subordination within the capital structure.

Also here's an article from Business Week about how the GSEs were blind to the housing crisis.