Torrential

As you read yet another installment in a relentlessly downbeat torrent of financial news courtesy of the Republican party (because, after all, the germ of the mess is Ronald Reagan Proved That Deficits Don't Matter), first remember not to whine, because it would John McCain and his trusted adviser Phil Gramm cry; then, soothe yourself by listening to Jim Cramer tell you, "Hey, people are lined up to buy iPhones! How bad can things possibly be?"); and then take a look at these pictures of a June protest outside the Fed. (Be sure to click so that you can read the signs the protesters are carrying.) These folks are going to have something to say about this:

Finally, for taxpayers and the United States government, the risks posed by Fannie’s and Freddie’s declining share prices are potentially overwhelming.

As government officials discuss various rescue plans — including taking over either or both companies in a conservatorship, others are pushing for more immediate action. “We are potentially looking a crisis in the face, and we must not allow this to happen,” said William Poole, who retired in March as president of the St. Louis Federal Reserve. “The government must intervene.”

If a bailout were to occur, it would most likely make it more expensive for the United States government to borrow money in the future, since the government’s potential obligations, which currently stand at about $9 trillion, would rise by an additional $5 trillion. Moreover, such a bailout would potentially put taxpayers on the hook for billions to offset Fannie’s and Freddie’s losses.

“The major banks are taking write-downs of 20 percent to 50 percent of their assets,” said Sean Egan, managing director of Egan-Jones Ratings, an independent credit ratings firm. Just a 10 percent write-down in the value of Fannie Mae’s assets would be “a loss of $150 billion that taxpayers would need to offset. So you’re talking about the cost of another Iraq war.”

What will you say?

/pictures via The Cunning Realist