Does this increase their stock value any time soon? If so, what is the general lag time between that purchase, and the improvement in Fannie and Freddie’s stock ans asset value?

Sooooooo MANY government programs are tied to inflation figures. Even if the budget for a given year was flat (zero increase from the prior year) gov spending would STILL go up because so many programs are automatically increased based on inflation numbers.

Therefore, if the gov artificially (i.e. deliberately!) under reports inflation those automatic increases are smaller. Therefore the pols can take a cheap and easy path to *claim* they are reducing spending!!

I know so many people who, this time last year were living very comfortably, and now are scrapping by to pay the monthly bills. (take my word on it they aren’t living the life style of the rich&famous)

I happen to suspect that almost all of the steps the government has taken to react to the financial crisis revolve around one simple thing: The US Federal Government is in a panic over it’s own debt.

When the credit problems first started to emerge, the government was reluctant to take any big steps until they realised that the problem was quickly growing so large that the world’s largest borrower/debtor (the US Treasury Department) was at risk of finding that it too might no longer be able to borrow money. At that point, Congress enacted a very badly crafted and hastily thrown together program (TARP) in a record time. Our government can’t agree on the day of the week without at least a 6 month study to define what the word day means, but they suddenly manage within a couple days to agree to spend more money than we had ever put into a single spending bill, with almost no controls on how it was to be spent? Not very likely…

The AIG bailout is yet another “cover your hiney” move by the government. AIG provides backing on an incredible number of government debts, mostly at the state and local level. If AIG collapses, most of the state and local governments in the country could face immediate demands for repayment of anywhere from tens to hundreds of millions dollars due to clauses in those debt contracts. They would not be able to borrow the money to pay off those defaults because their credit ratings would drop faster than a lead balloon. Who would they turn to to demand assistance? Oh, yeah, the government and the US Treasury.

Last week the head of the government of China (one of the the US Government’s largest lenders) was publicly questioning the US Government’s ability to repay it’s debts and whether it was in China’s interests to continue to buy US Treasury notes. If that sentiment takes hold, the government will have no way to raise money BUT to print new money like there is no tomorrow… And there is no inflation formula tweak that will prevent people from realising it when inflation spirals upwards uncontrollably as a result.

Rick – you are welcome.

TAP – I thought the whole idea of bailing out AIG was to prevent its bankruptcy that would’ve caused problems in all of its customers. So why is everyone surprised now? Should they have negotiated all these CDS contracts back then – probably. But they didn’t. Now they own AIG and they are responsible for its contracts. If they start canceling the contracts they agree to honor, who would want to deal with them? Because of the whole madness in congress, the Chinese who don’t have credit default swaps but who have normal life insurance policies with AIG are lining up to take their money before the US government takes it. That’s a lot of money AIG will lose – insurance company’s equivalent of “run on banks”. Not to mention that with the way congress is behaving now would make all the private capital they need for their private-public partnership scared to have anything to do with the government. Would you deal with someone who broke a legal contract in the past? I sure wouldn’t. Their idea for taxing bonuses is just so ridiculous. Every time the congress grandstands my net worth drops…

Thank you for: 1)reading my post and 2) understanding that mush enough to provide a thoughtful answer. You could have a career as a psychic!

That’s because the gov doesn’t include energy, medical, food and housing in the inflation figures. They claim those numbers are too “volitile” so they just toss them out of the equation – how lovely!!!

I don’t know about you people but I *still* have to pay for energy (gasoline, electric, heating oil etc), food, medicine, and shelter expenses regardless of what the gov includes or not.

Does ANYONE out there think prices of just about everything haven’t gone up a lot in the last year??

What’s worse, some of those companies are foreign banks that used credit-default swaps to exploit a regulatory loophole. Should the United States taxpayer really be responsible for ensuring the safety of European banks that were taking advantage of European regulations?