Take a report, you bought 5 trillion dollars of mortgages.

The Fed and Treasury have made a statement that they will allow the GSEs access to the discount window. The Treasury has even gone as far as to say they may buy equity in the companies. This comes on the heels of Friday's denial of the GSE discount window report and Paulson's statement that equity shareholders should not be bailed out.

After a cavalcade of "informed" politicians and authorities assuring the public that the GSEs were "adequately capitalized", the Fed and Treasury felt it necessary to intervene over the weekend. It's quite an expression of confidence in a system that seems to be fatally flawed at it's core.

This is likely the Fed's last bullet... nuke really, as this is one hell of a shot across the bow. I expect Lehman will come under pressure later today as people come to realize this means the Fed will not be bailing them out. I hope it means they're not going to bail Lehman out too.

I don't think this is good news at all. I think it's a scary admission that the system is broken. It is likely going to kill bonds as it sets in that our currency will be hopelessly devalued through its potential ties to the securities and mortgage markets. Every time they tie the dollar to the value of falling housing prices, they dilute the value of it. Once we had a gold standard -- this is more like a lead standard.

The chart in FNM barely held on Friday. The chart in FRE broke terribly on Friday. I'm much more inclined to play FNM long given a choice between the two... and I'm there. Disillusioned and a bit bitter, but I'm there.