I read a few doom-and-gloom blogs (housing, economics, peak oil) and yeesh, today is all about the imminent failure of Fannie and Freddie. 25 billion or 5 trillion; either way its rather a problem. From Robert Reich:

Any day now – perhaps any hour – the plug will be pulled on Fannie Mae and Freddie Mac, and a massive government bailout will ensue. Together, they’ll become the largest government-owned entities in American history, and, once again, taxpayers will pay the bill, which could come to $25 billion or more.

From Jim Kunstler:

At the moment, two of the biggest elephants in the room, so to speak, are going tits-up with X’s where their eyes used to be. These would be the “affordable housing” enablers Fannie and Freddie, who managed during the past decade to make housing virtually unaffordable for any normal, responsible person unwilling to game the system – with the additional consequence that not only the housing market but the general credit-and-lending apparatus of the US has entered a state of morbid failure. These two corporations are now dead, incurring a legacy of obligation that will add five trillion dollars to the national debt at one stroke. Nobody knows what the exact results of this debacle may be – and the current silence about it is deafening – but odds are the effect will range somewhere between destroying the currency and bankrupting the United States altogether.

How did this happen? Well, check this out:

(That’s from a Krugman post.)

Yep, that’s the Bush (HW)-appointed head of OTS, which along with OCC regulates much of the banking industry. Taking a chainsaw to a stack of regulations that were ‘strangling the industry.’ Whew, good thing that was averted, eh?

This last Kunstler quote seems to capture it pretty well:

I’m rather convinced that the carnage on the money scene will be so extreme this fall that the nation will seem to have been transformed from a superpower to a basketcase before November 4th, and that the blame for this state of affairs will be blindingly obvious: the people in charge for the past eight years looted the treasury, destroyed the currency, and left the machinery of capital a smoking wreckage.

Heck, even Obama sees it coming:

“Here’s the problem: If Fannie Mae and Freddie Mac collapsed, then probably the financial system would receive such a body blow that it could be disastrous”

• Barack Obama, August 25, 2008

Lovely weather we’re having, innit?