A Day of Financial Infamy

The NYT is reporting that Fannie and Freddie are going into "Conservatorship", which sounds a lot like temporary nationalization, except that no one in the current administration can own up to nationalizing $5 trillion dollar institutions:

Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers.

A conservatorship would operate much like a pre-packaged bankruptcy, similar to what smaller companies use to clean up their books and then emerge with stronger balance sheets.

The Bush administration has officially socialized the losses with this announcement.

We note that the Washington Post claims that the Bush administration is going to protect the preferred shareholders. This will be remembered for a generation or more.