According to the TimesOnline, the US Treasury Secretary is looking into a $15 billion dollar cash injection for crisis-hit mortgage lenders Fannie Mae and Freddie Mac.

The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.

Together, the two stockholder-owned, government-sponsored companies own or guarantee almost half of America’s $12 trillion home-loan market and are vital to the functioning of the housing market.

The capital-injection plan is said to be high on a list of options being considered by regulators as a means of restoring confidence in the lenders. The move would protect the American housing market, but punish shareholders in both companies.

Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.

[snip]

David Buik, partner at BGC Partners, said: “These agencies are the backbone of financial society in the US. They simply cannot be allowed to fail, and the government won’t allow them to fail. Whatever the solution is to this problem, I can’t imagine it will be good for shareholders.”

Remind me again why I would want to invest in FNM or FRE when the gov’t may pull shit like this at any time? How can anyone claim that these two entities aren’t indirectly nationalized when they are not “allowed to fail”? Cue that analogy comparing capitalism without failure and religion without hell.

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