Yesterday, I tweeted about the Xmas Eve decision by the Obama administration on FNM and FRE. The cap to lending to these two mortgage giants was lifted and could cover unlimited losses over the next three years. The US Treasury receives preferred stock in both companies paying 10% dividends. Already, the US has paid out $111 billion: $60 billion to Fannie and $51 billion to Freddie. The previous cap was $400 billion. Treasury said that this was “necessary for preserving the continued strength and stability of the mortgage market.”

Why was this done at this time? The driver was a … …READ MORE