This is enough to bring Milton Friedman to tears. I remember from my US history lessons that it was a deregulated market (particularly in the financial sector) which brought on the market collapse of 1929 and the ensuing severe economic recession.

Despite their affiliation with many of the ideological underpinnings of Milton Friedman's "Chicago School" economics (privatization, disaster and gun capitalism, totally unregulated markets) - it seems that the current decision makers see that sometimes the government has to step in - in order to prevent disaster. (But I thought these decision-makers like disaster - disaster means major investment opportunity and profit potential...) Of course, this last gasp effort to save these struggling mortgage giants could have been avoided with increased oversight and appropriate regulatory devices/actions. But hey, hindsight is 20/20, right? I mean, what fun would it be to simply learn from mistakes?

Well, I am of the opinion that in the severe unethical environments of business and government, that regulation is essential. Perhaps if we had a world that was ethical to the point where people didn't do harm to each other, or seek to exploit others for their own (supposed) advance, then we wouldn't need government. I believe in a vision of "utopian" anarchy. But how will that be possible while these massive corporations have so much power and influence? So much power.

From Yahoo! (I don't know if the link will stay so I am posting the whole story):

AP US Government takes over mortgage giants

By MARTIN CRUTSINGER and ALAN ZIBEL, AP Business Writers 2 hours, 25 minutes ago

WASHINGTON - The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.

The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars. Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price on consumers by driving up the cost of home loans and all other types of borrowing because the failures would "create great turmoil in our financial markets here at home and around the globe."

Mark Zandi, chief economist at Moody's Economy.com predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent. That's because investors will be more willing to buy the debt issued by Fannie and Freddie — and at lower rates — since the federal government is now explicitly standing behind that debt.

"Effectively, the federal government has now become the nation's mortgage lender," he said. "This takes a major financial threat off the table."

Read the whole thing.