TraderWise

In what appears to be the final iteration in a long and winding journey - after months of denying it would actually need a bailout (circa Bear, Lehman, Fannie, Freddie), Greece has formally requested funds overnight.  Just as the "bazooka" Hank Paulson promised would never be needed for Freddie & Fannie the "loaded gun" that was on the table which would dissuade speculators, apparently didn't have any bullets.

Of course markets are giddy ....

Here’s another timely story from the Wall Street Journal. Forex markets are in a doozy today with speculation of another possible ratings downgrade for Greece. A bunch of Greek banks were already downgraded earlier this week. However Spain could be the next straw to break:

Greece set off the crisis rattling the euro zone. Spain could determine whether the 16-nation currency stands or falls.

Obviously Portugal and Greece (aka Bear Stearns) are sideshows to the much larger Spain (aka Lehman). [I'll save a crisis in the UK or Japan as Fannie, Freddie]

In what could prove to be the biggest federal bailout in U.S. history, the federal government will take control of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) - the U.S. government’s latest attempt to blunt a credit crisis that has spawned more than $500 billion in losses since it began.

A series of high-level meetings between Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and the chief executives of Fannie Mae (FNM) and Freddie Mac (FRE), along with the companies' new regulator, the Federal Housing Finance Agency took place today.

Rumors of the meetings had obviously leaked out earlier in the day, as the Financials and Homebuilders ramped up into the afternoon. Beazer Homes gained +8%, and Lennar popped 8.5%, despite the 4 million plus homes in inventory. 

Government bailout of Fannie and Freddie reuslt in lower yen in currency tradingThe Japanese yen is plunging rather dramatically in forex trading on the news that the U.S. government is taking over Fannie Mae and Freddie Mac.

Here is all we know so far:

WASHINGTON (Reuters) - The U.S. government announced on Sunday that it was taking control of troubled mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE), effectively wiping out shareholders' interest in the publicly traded companies.

The regulator of the two companies, the Federal Housing Finance Agency (FHFA) will manage the two companies on a temporary basis.

Today I’ve been thinking about who the winners and losers of the government bailout of Fannie Mae (FNM) and Freddie Mac (FRE) will be. It will take some time to sort the impact of unprecedented government intervention on the financial markets. However, the market is already betting on how this “black swan” event will play out.

Instead of rehashing both the labor report and the continued shell game scheme that is the privatization of gains, and the socialization of losses, I will refer to previous posts if you are interested as support material on both topics. As I've been saying the game plan here is to remove the risk from the banks and then suffer losses quietly on government balance sheets via FHA, Freddie, Fannie, Federal Reserve in coming years while watching the market soar (free of risk!) and the American citizen, with short attention span, not paying attention as the losses mount in the background.