The word on the streets and on the wires is that US Treasury is considering injecting $15 billion into Fannie Mae and Freddie Mac. A rescue package may be announced ahead of the opening of the US markets Monday morning, perhaps prior to the opening of Asian markets, if you believe the hype.
First question: what happened to all those assertions that Fannie and Freddie were "adequately capitalized"? Or were we supposed to know that was a lie just because it was so damned implausible.
Absolutely no one is quoted in this story, however. Not even a "person familiar with the matter." Does that make it more or less plausible? We forget.
It probably goes without saying that you should exercise extreme skepticism about this, especially after Friday's triple head fake. You remember that, right? First we heard that the government was going to takeover the pair and wipe out shareholders. Then Bernanke was opening the discount window to both. And then he wasn't. It's all been very suspicious, very third-world and banana republic, very unfree market. Watching all this is like engaging in Kremlinology.
Freddie Mac and Fannie Mae future may rest with US Treasury [Telegraph]
Update: Paul Kedrosky cites a Times of London story, and adds much the same warning.
This story is so thinly sourced that I was initially hesitant to post it, to be frank. These are skittish and perilous times, and no unnamed person is even quoted indirectly in the article, let alone directly. In many ways it sounds like an echo chamber version of what was discussed all day Friday by the chattering class.
That makes it hard to know what to make of it. Are we just hearing a cross-Atlantic repeat of what was discussed Friday, or is this story sourced sufficiently well so as to make it anything other than a stupid, contagious and dangerous rumor?