Hotly discussed in many venues today, the morning’s big news was the intervention planned and underway for Fannie and Freddie by Treasury and the Fed. 

Interestingly details of the actions proposed are still lacking.  The Treasury announced late Sunday that it will seek Congressional approval for a temporary (it would be interesting to see how many truly believe that temporary) increase in a longstanding line of credit for the pair (it’s already $2.25 billion).  Treasury also indicated it would seek temporary authorization to buy equity in either company “if needed” to ensure they have “sufficient capital to continue to serve their mission”. 

The Fed board met yesterday in Washington and voted to grant effectively access for both companies to the Fed’s discount window if the firms were to face a “short term funding crisis” in the near or not-so-near future.  Treasury also desires that the Fed play a role in setting the rules for how much of a capital cushion each company must hold, a role the Fed is apparently willing to play. 

Commentary flowed from almost every news and opinion portal this morning like lava from an erupting volcano, and ranged as you’d expect across the ideological spectrum. 

Two points of perhaps critical interest to follow today – one being the share price of Fannie and Freddie; they were up pre-market opening and in the red by mid-morning.  The second being the full details of the $3 billion in short-term debt sold by Freddie Mac this morning.  If deemed successful, it might just ease the tone of panic a bit, and reflect investor confidence. 

**The paragraphs above were written this morning (about 1000 EST), and what follows was written after 1700 EST. 

The short term debt sale met expectations this morning, though Fannie’s stock price was down 5.1% and Freddie’s 8.3% at day’s end, suggesting ongoing concerns about the lack of detail for the “big plan” and reasonable concerns about the broader credit / financial markets.  This saga isn’t over by a long shot; the end of beginning might be near though. 

Meanwhile, back at the ranch, we’ve thrown another pot of coffee on and keep looking for those markets with sound fundamentals - the harder we look, the more we find.  

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