1) We had to do it. We were tricked. They lied about their capital situations... oh and doing the bailout this way will cost less. No, we don't ACTUALLY know how much it will cost.
2) Conservatorship was the only choice. Monday will be business as usual... oh, and we created a liquidity facility for the FHFA... but don't worry, we don't think they'll have to use it. BTW, the GSE business model was flawed.
3) The Preferred Stock Purchase Agreement will make sure the GSE have a positive net worth.
I enjoyed this little moment of truth from Hank Paulson the most:
"These Preferred Stock Purchase Agreements were made necessary by the ambiguities in the GSE Congressional charters, which have been perceived to indicate government support for agency debt and guaranteed MBS. Our nation has tolerated these ambiguities for too long, and as a result GSE debt and MBS are held by central banks and investors throughout the United States and around the world who believe them to be virtually risk-free. Because the U.S. Government created these ambiguities, we have a responsibility to both avert and ultimately address the systemic risk now posed by the scale and breadth of the holdings of GSE debt and MBS."
Hahaha! (Click to enlarge) It says right on each and every single certificate in bold: THE CERTIFICATES AND PAYMENTS OF PRINCIPAL AND INTEREST ON THE CERTIFICATES ARE NOT GUARANTEED BY THE UNITIED STAES, AND DO NOT CONSTITUTE A DEBT OR OBLIGATION OF THE UNITED STATES OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES OTHER THAN FANNIE MAE.
I thought that was pretty clear. But then again, I'm pretty sure the Chinese were pretty clear over the phone as well...
See Chinese Central Bank in Need of Capital.
We all watched Bill Gross whine publicly on CNBC to be made whole...
See Bill Gross: Big Bet, Big Fail?