Treasury and Fed Promise Bailout for Fannie and Feddie, SEC Crack Down on Rumors

Regulators worked overtime this weekend to concoct some sort of plan to stem a potential full-blown market collapse following a pummeling in financial stocks all week that culminated in IndyMac's failure on Friday afternoon.  The good news is that they seem to have been successful in implementing some level of confidence as futures are up this morning.  The bad news?  The prospect of the government shoveling tax money into Fannie and Freddie in the form of debt and equity financing could possibly turn into a very expensive proposition over the long term, depending on how poorly Fannie and Freddie's assets eventually perform.  Of course, the US government can print unlimited amounts of money to prop up the housing market, that is if nobody minds that a head of lettuce is going to cost $5 more in the afternoon than it did in the morning on any given day.  We won't even get into what it may cost to fill up your gas tank.

Hank Paulson asked that Congress to allow the Treasury temporary authority to buy equity in the firms if necessary and to increase their lines of credit.  Meanwhile, the SEC has announced it will crack down on the spread of false rumors intended to manipulate stock prices.  The FDIC was busy organizing an orderly liquidation of IndyMac.  Finally, the OTS and Chuck Schumer were busy blaming each other for who was responsible for the run on the bank.  At least a few of our regulators were attempting to enact positive measures, which is always reassuring.