http://www.bloomberg.com/…

Fannie Mae and Freddie Mac rose in Frankfurt after U.S. Treasury Secretary Henry Paulson said he will seek approval from Congress to shore up the mortgage finance companies by buying equity stakes and increasing lines of credit.

Fannie Mae gained 31 percent in German trading and Freddie Mac advanced 33 percent after Paulson said he would seek authority to buy unlimited amounts of equity. The Federal Reserve also agreed to lend directly to the two companies to help provide interim financing.

Paulson’s plan may put a floor under the shares, which dropped by about 50 percent last week on concern that shareholders would be wiped out if the companies collapsed or were taken over by the government. Concern that Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, may collapse escalated last week, prompting Treasury, Federal Reserve and White House officials to forge a plan to rescue the companies should they be unable to fund themselves.

“Paulson said he would seek authority to buy unlimited amounts of equity.”

Hyperinflation, here we come?!

No wonder the stocks are up. Paulson is talking about turning all the cotton on the planet into FRNs.

http://www.bloomberg.com/…

The cost of protecting against losses on Treasuries rose to the highest in almost four months on speculation any financial support for mortgage lenders Fannie Mae and Freddie Mac may cost the U.S. government its AAA rating.

Credit-default swaps on Treasuries increased 4 basis points to 18, according to CMA Datavision prices at 2:30 p.m. in London. The 10-year contracts are near the record 19 basis points when the Federal Reserve backed the bailout of New York- based brokerage Bear Stearns Cos. on March 17.

Senior Bush administration officials are considering a government takeover of one or both mortgage lenders, according to a person familiar with the discussions. Fannie Mae and Freddie Mac have about $5.2 trillion in debt outstanding, exceeding the Treasury’s $4.6 trillion in notes. Standard & Poor’s said in April that possible support of government- sponsored lenders posed a threat to the government’s top rating.

“The ratings agencies said the risk for the U.S., if it bails out Fannie and Freddie, is it could lose its AAA rating,” said Andrea Cicione, a London-based credit strategist at BNP Paribas SA. “It is clearly a possibility, albeit a remote one.”

Investor speculation the government will provide support helped drive down the cost of default protection on the mortgage companies’ senior debt. Credit-default swaps on Fannie Mae dropped 17 basis points to 62 and contracts on Freddie Mac fell 23.5 to 55, according to CMA.

Treasuries fell the most in three weeks, increasing the yield on the benchmark two-year note by 8 basis points to 2.49 percent, according to bond broker BGCantor Market Data.

Shares in Washington-based Fannie Mae and Arlington, Virginia-based Freddie Mac tumbled for a third day on concern the firms don’t have enough capital to offset writedowns. Their failure would deepen a housing slump that already is the worst since the Great Depression.

The companies, which own or guarantee about half of the $12 trillion of U.S. mortgages, may be able to count on a federal lifeline because they are too big for the government to allow them to fail, leading Republican and Democratic lawmakers said.

This is what government intervention gets you. Sit back and enjoy it. You’re paying for it.

http://www.bloomberg.com/…

Federal Reserve Chairman Ben S. Bernanke, seeking to allay renewed concerns over the health of the nation’s financial system, said the central bank may extend its emergency-loan program for investment banks into next year.

“The Federal Reserve is strongly committed” to financial stability and is “considering several options, including extending the duration of our facilities for primary dealers beyond year-end,” Bernanke said in a speech to a conference in Arlington, Virginia.

Woot! More inflation!

Bernanke also endorsed proposals to set up a federal liquidation process for a failing investment bank. The Treasury should “take a leading role in any such process” in consultation with regulators, he said. Such a resolution mechanism may help reduce concern that investors and dealers begin counting on Fed aid in case their bets go wrong.

So like enforcing the current bankruptcy laws? I somehow doubt it.

Fed officials are working with the Securities and Exchange Commission and securities dealers “to increase the firms’ capital and liquidity buffers,” Bernanke said.

More inflation!!

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon told the same conference that he supported Fed and Treasury proposals for “policies, because of what happened, to take proper action if a large investment bank goes bankrupt.”

Of course he does. He, and the rest of Wall St., directly benefit from this intervention and inflation.

Without any liquidation procedure in place, the Fed in March decided to make a bridge loan to keep Bear Stearns out of bankruptcy. The central bank then agreed to take on $30 billion of hard-to-trade Bear Stearns assets to help secure its takeover by JPMorgan.

“The Federal Reserve in essence bought $30 billion of mortgage product from Bear Stearns; I want to remind people we bought $350 billion,” Dimon said today. “We don’t really think” the deal will end up costing taxpayers money, he also said.

I do. Anyone with a cursory understanding of economics could see that taxpayers will be both directly and indirectly paying for this. The indirect in terms of all the likely new regulations and powers the Fed will get on top of the inflation that will continue to destroy the middle class and poor are likely the greatest costs.

Congress should legislate “consolidated supervision” of investment banks and other big securities firms, with the unspecified regulator having authority over capital, liquidity holdings and risk management, Bernanke also said today.

The Fed should also get “explicit oversight authority” over payment and settlement systems, putting the it on a par with counterparts from around the world, Bernanke said.

U.S. central bankers will already play a part in setting capital cushions at securities firms under an agreement yesterday with the SEC. The two agencies will collaborate in determining “guidelines or rules concerning the capital, liquidity and funding” arrangements of investment banks, the accord said.

Because obviously planned economies have worked so damn well. They function like clockwork everywhere they have greater control. Right Ben?

Got this from the John McCain 2008 campaign today:

Attention New Jersey Republicans,

The New Jersey Primary is Tuesday, June 3rd. In order to support John McCain, you must vote for the McCain Delegates and Alternates that represent both New Jersey Statewide and your Congressional District.

Statewide, the following Delegates and Alternates support John McCain:

Delegates
Alternates
Bill Baroni
Francisco Dominguez
Lawrence E. Bathgate
Alan Herman
Alex DeCroce
Ann Kievit
Judy Eisenberg
Amanda E. Layton
Joanne Gilmore
Joseph Leo
Cheryl Halpern
Robert A. Ortiz, Jr.
Munr Kazmir
Lynda Pagliughi
Tom Kean, Jr.
Rita Shade
Thomas H. Kean, Sr.
Doug Steinhart
Joseph R. Schmuckler
Stephanie Zarych

Also, please vote for the following delegates and alternates in your Congressional District. If you do not know which is your district, you may find it here: http://www.house.gov/zip/ZIP2Rep.html.

District
Delegates
Alternates

1

Richard A. DeMichele, Jr.
Jeffrey Booker
Richard Mroz
Wayne Brehm
Loren Oglesby
Terry Kasko

2

James Curcio
John M. Bettis
Keith Davis
Florence A. Butler
Michael J. Donohue
Patrick Finley

3

Thomas F. Kelaher
Lisa Bialoskurski
Barbara Lanuto
Ann Marie Emmons
Richard C. Strobel
Aubrey Fenton

4

Sean Kean
Claire French
Ruthanne Scaturro
Susan Rogers
Marie Smith
T. Robin Visconi

5

Arthur W. Conway
Rosemarie Adamiak-Russo
James A. Courter
Matthew Kazmierczak
Alison Littell McHose
Eleanore S. Nissley

6

John O. Bennett
Jennifer Beck
Carol Ann Haney
Robert A. Brown
Joseph Kyrillos
Adam Puharic

7

Kathi Fiamingo
Mike Ferguson
Henry Y. Kuhl
Maureen Ferguson
Joseph J. Plumeri
Patricia Kelly Hatfield

8

Kevin J. O’Toole
Lawrence “Pat” Kramer
Michael Rubin
Mark Meyerowitz
Linda Zisa
Marie Vicchiariello

9

Benjamin Chouake, MD
Judith W. Fisher
Kathleen A. Donovan
Russell P. Trocano
Ryan J. Peene
Patricia Zisa

10

Harold Edwards
Leslie Ellis
Mary Devon O’Brien
Herb Glenn
Hadren Simmons
Christopher Smith

11

Rodney P. Frelinghuysen
Debra Eckert-Casha
John J. Murphy
Phyllis J. Florek
Joseph Pennachio
Edward V. Rochford

12

Diane Gooch
Nicole Motta Eventoff
Samuel D. Thompson
James A. Maggs
Dick Zimmer
Bill Spadea

13

Irene Kim Asbury
Michael S. Glassner
Alberto Rodriguez
Beth Hamburger
Joe Tarulla
Reyes Ortega

Please print out the names, and bring with you tomorrow so you know which McCain Delegates to vote for!

Thank you,

Team New Jersey
John McCain 2008
Please visit this page if you want to remove yourself from the email list.
Paid for by John McCain 2008 www.JohnMcCain.com
John McCain 2008
P.O. Box 16118, Arlington, VA 22215
Phone: (703) 418-2008
Contributions are not deductible as charitable contributions for federal income-tax purposes. Federal law requires us to report the name, address, occupation, and employer of any contributor who gives more than $200 in an election cycle. For the primary election, an individual may give up to $2,300, a couple may contribute up to $4,600, and a federal PAC may contribute up to $5,000. Contributions from corporations, labor unions, federal-government contractors, national banks, and foreign nationals without permanent residency status are prohibited.

I’d recommend not wasting paper printing this out and just remembering to vote for the delegates under the Constitutional Republicans Protecting the Liberty Platform banner.

http://news.yahoo.com/…

The House of Representatives overwhelmingly approved legislation on Tuesday allowing the Justice Department to sue OPEC members for limiting oil supplies and working together to set crude prices, but the White House threatened to veto the measure.The bill would subject OPEC oil producers, including Saudi Arabia, Iran and Venezuela, to the same antitrust laws that U.S. companies must follow.

The measure passed in a 324-84 vote, a big enough margin to override a presidential veto.

The legislation also creates a Justice Department task force to aggressively investigate gasoline price gouging and energy market manipulation.

“This bill guarantees that oil prices will reflect supply and demand economic rules, instead of wildly speculative and perhaps illegal activities,” said Democratic Rep. Steve Kagen of Wisconsin, who sponsored the legislation.

The lawmaker said Americans “are at the mercy” of OPEC for how much they pay for gasoline, which this week hit a record average of $3.79 a gallon.

The White House opposes the bill, saying that targeting OPEC investment in the United States as a source for damage awards “would likely spur retaliatory action against American interests in those countries and lead to a reduction in oil available to U.S. refiners.”

The administration said less oil going to refineries would limit available gasoline supplies and raise fuel prices.

Foreign investment in U.S. oil infrastructure has declined in the last decade. But the state-owned oil companies of several OPEC nations are owners of U.S. refineries, and those investments could be affected if the legislation becomes law, said Arlington, Virginia-based FBR Capital Markets Corp.

The bill also requires the Government Accountability Office to carryout a study on the effects of prior oil company mergers on energy prices.

The Senate would still have to approve the House measure.

The Senate previously approved similar legislation as part of a broad energy bill. However, the OPEC-suing provision was removed after White House opposition in order to get the underlying energy legislation signed into law.

Speculation is an essential knowledge source for the market. Just like any other source it’s important for the market to function optimally. The speculation is wild because some group of jackasses in Congress and the executive branch of the USA government are waging wars on people who did us no harm. Because they are screwing up the value of the currency and attempting to carve the path for future energy sources. No bill can guarantee prices. They will likely cause shortages like the late 1970’s. As Mises said when the government interferes and screws things up… they know nothing else but to continue to interfere and to screw up.

I’m not sure how the hell they can enforce anything like this, I’ve not read the bill yet, but this sounds to me to be a declaration or war or at least an aggressive act.

If the government wants prices to drop stop the intervention. Leave the market alone. Leave the people and governments of the oil producing nations alone. Leave domestic energy production alone. Let them build refineries, let them drill for new oil sources, let them build nuke plants. Then will the costs normalize.