Gross: $40 billion needed for Fannie/Freddie bailout

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A special all-Fannie & Freddie roundup:

A good wake-up call from CNBC.com: ‘As investors dumped shares of Fannie Mae and Freddie Mac for the third straight day, CNBC’s Jim Cramer urged that trading in both stocks be stopped altogether because they were being manipulated by people with insider information.’

Now that you’re awake, read Tom Petruno’s post this morning at Money & Co. arguing that the stock prices of Fannie Mae and Freddie Mac are largely irrelevant at this point. The bond market, not the stock market, will determine Treasury Secretary Henry Paulson’s next move in this bailout drama, Petruno reasons.

The Washington Post, meantime, dug up some memos from 2007 in which Fannie Mae talked about the importance of expanding its market share in subprime lending. Here’s the best part: The geniuses at Fannie Mae recognized that subprime loans were not performing well in 2006, but they predicted subprime products would perform better in 2007.

What’s next for F&F? Something very expensive involving your money, no doubt. Bond guru Bill Gross tells CNBC it’s going to take $40 billion of your money -- spent by Paulson -- to recapitalize Fannie and Freddie.

--Peter Viles
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo: Associated Press