You all probably didn't realize I was in the market to buy one did you.  Well frankly, neither did I.  Of course during the house boom, it seemed awfully attractive.  I mean seriously, what a great investment right?  Who wouldn't want to buy a house, especially with those incredibly attractive interest rates, and the fact that you could get one with practically no money down.  Hell, it almost seemed cheaper to buy a house than a car... and the problem with a car is that they depreciate in value.  Of course, I didn't buy a house during the boom.  But as it turns out, thanks to all the people who were less responsible than me, I get to buy all of your houses.  You're welcome.

I'm of course referring to the buying out of Freddie and Fannie... or how the government F'd up... twice.  The interesting thing here is that nothing new has happened in the last month or so to cause this buy out.  It's obviously been planned for quite a while.  While some argue that it was a necessary evil to prevent the economy from tanking further, I'm not sure I agree.  Yes, this has been painful, but frankly... we need the pain:

"Economic failure is to the economy what physical pain is to the body. No one enjoys pain, but without it the body would lack the information needed to maintain its health." Government subsidies to prevent business failure simply keep pouring money into businesses that are relatively unsuccessful at satisfying consumer desires. They are, among other things, censorship of vitally needed information. Employees, entrepreneurs, and investors need to know where their money and talent are most valuable. Profits and losses are key indicators of that.

This isn't the only sector of our economy asking for more cash either.  The Detroit automakers are begging for $50 billion.  Apparently bailing out Chrysler once wasn't enough.  How many second chances does that company get?

One of the most disturbing things about all of this is... well... it just happened.  This past weekend, this news item appeared in my reader that they got nationalized.  Who made the decision?  All of a sudden I felt like I was living in Venezuela.  Even though those mortgages were backed by federal dollars, shouldn't this have at least required some kind of vote by someone representing the people?  After all, we are now the proud owners of trillions of dollars of debt.  Does nobody think this is significant enough to... you know... discuss democratically?

Now that we're in the full swing of election season, there will be a lot of talk by liberals about how this is just another failure of the private market.  Make no bones about it... markets didn't fail here.  Fannie and Freddie weren't private organizations.  They were government backed.  They were insulated from the consequences of the choices they made by government funds, and so they made the worst possible decisions.  They did this for two reasons.  First, they lobbied the government for that ability to help their shareholders, and the government agreed.  That's because the boards of both groups were filled with former Washington heavyweights who had an easy time lobbying with their buddies back on the Hill.

The second problem is that Congress encouraged these loans.  After all, everyone deserves to have a house for their 2 1/2 kids, along with a big old garage for their SUV.  Over the last thirty years, Congress has been using the two of them to give taxpayers a sense that they could own more than they could.  Fannie and Freddie are the reason why we have a 30 year fixed mortgage to begin with.  Paul Krugman doesn't see this as a bad thing:

So what we’re really seeing now is deprivatization. It’s not something like the UK government seizing the steel mills; it’s more like firing Blackwater and giving responsibility for diplomatic security back to the Marines.

Because after all... we should trust the government that created the problem to fix it.  Housing is just too damned important to leave to "the market".  For their part, the Palin/McCain camp have come out with this statement (emphasis mine):

We promise the American people that our administration will be different. We have long records of standing up to special interests and providing the leadership to change government and make it more accountable to the American taxpayer. In our administration, every agency and department will undergo rigorous oversight and review. We will require the highest standards of accounting, reporting and transparency ever demanded in government.

Enduring reform of Fannie and Freddie is a key first step. We will make sure that they are permanently restructured and downsized, and no longer use taxpayer backing to serve lobbyists, management, boards and shareholders.
...
Policies must be in place to ensure that homeowners provide a responsible down payment of equity in the initial purchase of a loan. In the future, Fannie, Freddie or any government organization should never insure a loan when the homeowner doesn't have enough of his or her own capital in the investment.
...
We will push the nation's top mortgage lenders to provide maximum support to help cash-strapped, but credit-worthy customers.
...
In the first 100 days of our administration, we will look at every agency and department and expenditure of the federal government and ask this simple question: Is it serving the needs of the taxpayer? If it is not, we will reform it or shut it down, and we will spend money only on what is truly in the interest of the American people.

A few comments here.  First, there is the obvious contradiction.  Cash strapped customers, by definition, can't make a responsible down payment on their home.  You can't have it both ways!  Either you force people to have a decent down payment, or you don't.  If you don't, as Megan McArdle points out:

Of course, the lurid stories we're hearing now are all about people locked into houses with rates they can't afford.  But that's because their downpayments were so miniscule.  In a normal market, they could sell and walk away, taking perhaps a small loss.  But with little or no downpayment, even a small movement in the value of their home wipes out all their equity, leaving them with no way out except foreclosure or bankruptcy.  If you can't come up with the cash for your mortgage payments, you certainly can't come up with a big check to hand over at closing to make up the difference between the mortgage and the sale price.

Secondly, I'd like to point out the stupidity in making this 100 days promise.  First of all, no administration that I know of has ever been able to keep a major 100 days promise.  This is about as stupid as Obama promising to read over the entire Federal budget, which he did during his nomination acceptance.

Perhaps at this point in the game, we had no choice but to do what we did.  What will be most important now, is what we do with these two giants so that we don't continue to make the same mistake over and over again.  Given government's history, I'm not optimistic.  Almost all politicians, when given a choice, choose to double down on a bad policy.  Expect to see these two giants stay under stricter government control, where some folks in Washington will decide that they can plan the economy from their desk.  It didn't work for the USSR, but I'm sure our guys are much smarter than that.  Yeah... right.