It's clear that "moral hazard" is considered by TPTB to be a very minor issue in this credit mess. They have bigger fish to fry, such as the imminent death of the entire MBS US housing market complex.

I'm trying to get inside their heads to understand what their line of thought is, and what is coming.

I think Hank increased the stakes and is playing chicken with foreign lenders. By making MBS == Treasuries, he's essentially doubled down the .gov position and seems to be putting foreign lenders on notice that they're on the hook for helping us resuscitate the MBS market, because they can't "refuse" to buy MBS since we'll just make up for the shortfall in treasuries, thus making them essentially the same.

I don't see how this can be a future-proof plan, though. Uncle Sam's balls will get smashed in a vice when foreign lenders stop buying even treasuries when the implosion continues. Hank has to know that.

So there must be another shoe to drop here.

Either Hank is looking for a temporary save to get us through inauguration, or there is another trick up their sleeves.

Perhaps something along the lines of a Ginnie Mae takeover, or something to do with a new covered bond scheme? Or a little of both? Fed to run down FRE/FNM portfolio while rolling a new amount of very conservative MBS through GNM with covered bond on the side to handle the riskier MBS in a Euro-US hybrid approach?

That almost sounds like a good idea.

I have to imaging, other than a few more bank failures and raising money for the FDIC, there won't be much else this year. Can we really afford to bail out any more private entities? I think just FDIC insurance/bank closures will keep Fed busy for the rest of the year.

wow, I guess we can officially close this thread now.

Lehman money, AIG bailout, printing money, RTC2, short selling ban (although that last one was Cox's doing).

I'm afraid to even suggest, "What next?!"

Hope you're correct Pel, don't think we can take any more!!