Why the US stock markets will not rally. Fannie Mae and Freddie Mac are on a death march. They are the very heart of the secondary finance market for housing in this country. Without them, there is no housing market......but the GOPers have never liked them because they are quasi public/private. And so, the death march continues as the anti Christ movement in this country gets their way one more time!
clearstation.etrade.com
clearstation.etrade.com
We Need a Plan to Rescue Fannie, Freddie
By Jim Cramer
RealMoney.com Columnist
7/9/2008 5:15 PM EDT
No, the market is not prepared for the collapse of Fannie Mae and Freddie Mac. It's not prepared, and it doesn't know what to do.
I talk about this endlessly here and on videos on my TV show, about this endless oncoming train wreck. To me, it is imperative that the federal government have an action plan. These are not some nothing private companies that don't matter. Or that can be left for roadkill.
These are actually too big to fail, even if the equity for them isn't too big. They need to be recapitalized with emergency funding by the government, and the guarantee must be made explicit. Or else we can easily drop very, very big from here, because the departure of these two from the firmament will gridlock the markets in a way that Bear Stearns could never do.
Understand that these two companies can be taken over with the equity wiped out.
The issue is, will this government even understand what is happening?
Last night on "Mad Money," I made a plea to the candidates to address this housing issue, as the Congress failed to act on it. I reiterated that plea in a video today.
We can handle the collapse of even the biggest banks through the splitoff of good and bad -- like Merrill (MER - commentary - Cramer's Take) talked about today with Wachovia (WB - commentary - Cramer's Take).
But only the government can save Fannie and Freddie.
I just hope that Treasury, the Fed and, yes, the man who only knows to talk tax cuts, the president of the United States, get what is about to happen.
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