In the past, I've questioned Barack Obama's views about the roles and responsibilities of public companies and their relationships with the government. I criticized him for his comment that "I do think it would be a shame if Bud is foreign-owned. I think we should be able to find an American company that is interested in purchasing Anheuser Busch if in fact Anheuser Busch feels that it's necessary to sell."

Now I'm here to praise him for his comments on the quasi-governmental publicly-traded train wrecks that are Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Last week, Obama said (subscription required) that "Long term, what we have to do is go ahead and make a decision. If these are public entities, then they have to get out of the profit-making business, and if they are private entities, then we don't bail them out."

He's absolutely right: before we pump taxpayer money into Fannie and Freddie, we need to assess their role in the world. If Fannie and Freddie exist to create profits for private investors, then they should go to private investors for capital.

Obama is taking an interestingly libertarian stance on the Fannie-Freddie issue, and he comes across as more enlightened than he has in the past when talking about stock market-related issues. Perhaps Obama has been talking with staunch supporter Warren Buffett.

Our government has been doing its share of bailouts in the last year. It put $29 billion of taxpayer money at risk to finance the takeover of Bear Stearns. It stands ready to use $800 billion to bailout Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And now General Motors (NYSE: GM) wants $50 billion in government guarantees to finance fuel efficient cars. I have been looking into the bailout issue and whether it is beneficial or a misuse of funds - and there is a lot of debate about this issue. These bailouts may make political sense but are they in the long-term economic interests of the country?

A colleague of mine who was a Budget and Cost Analyst for a top government agency has been thinking about the political aspect of bailouts and shared his thoughts with me. As he wrote, "It is a sure thing that either party could get votes from a bailout, but they might loose some as well. Where a party could really improve its position would be to support a bailout, but lose."

He suggests that this outcome would pay off in the short-run but could damage long-term economic outcomes. As he suggested, If the party supported a bailout but lost, "it could claim that it was trying to support the victims, but had been frustrated by the other party. And this could be used to promote the party for many years in efforts to get votes. While maneuvers of this sort may get short run votes, over the long term they might be hurtful of sound economic growth and performance."

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

You may not follow the ongoing drama, the one about Freddie Mac (Federal Home Loan Mortgage Corp.: NYSE: FRE) and Fannie Mae (Federal National Mortgage Association: NYSE:FNM).

You probably see the headlines about problems each has, maybe wonder what the fuss is about. Since you don't own the stock or the preferred or any of the debt, you don't really spend too much time on it. You've got your own stocks with problems, or you've just got enough problems without any stocks.

Rep. Barney Frank, chairman of the House Financial Services Committee, is normally a voice of sanity and reason, but like much of Washington, he too has apparently fallen for the conspiracy theorists -- mainly failing CEOs and disgruntled shareholders -- who blame the problems of financially irresponsible companies on short sellers.

In an interview with Money, Frank was asked about Fannie Mae and Freddie Mac:

I believe Fannie and Freddie are better off than the market thinks. Over the long term the market is a very rational distributor of resources, but in the short term it can fall prey to hysteria. Sometimes you need to deal with that.

Part of the problem is rumormongering by short-sellers. Our hope is that just by making U.S. financial support available, we'll quiet the fears and eliminate any need for that support.

Apparently, Warren Buffett is one of the rumormongers. Last week he said that the two mortgage finance companies "don't have any net worth," and added that shareholders are likely to be wiped out.

It's unfortunate that Congressman Frank has fallen into the trap of name-calling, questioning the motives of the handful of savvy investors who were prescient enough to foresee trouble at Fannie and Freddie. We're in an era of financial McCarthyism, where anyone who raises questions about companies is a "rumormonger" or a "short seller." That's dangerous for the market in the long run because it squelches dissent and contributes to speculative bubbles.

The Washington Post reports that Hank Paulson plans to turn the back of his hand to people who hold common shares of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) in his "rescue" plan. But Paulson may bailout the holders of their preferred shares -- which currently pay a dividend yield of about 20%.

Why does Paulson prefer the preferred to the common shareholders? That's because the common shareholders are big mutual funds with lots of small shareholders who have no importance to the economy in his judgment. The preferred shareholders are regional banks whose capital he thinks would sink dangerously if he wipes out their dividend.

Below is a list from the Post of the big Fannie and Freddie preferred holders:

• Regions Financial (NYSE: RF) which has an estimated $200 million,
• M&T Bank (NYSE: MTB) with $161 million, and
• Astoria Financial Corp. (NYSE: AF) with $83 million.

Minyanville Founder and CEO Todd Harrison dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.

Holy cow, can it be any slower out there? I'm taking a break from trying to set the all-time record for meetings on a "slow" summah Friday to offer a quick take on a few topics.

Will Lehman Brothers Holdings Inc. (NYSE: LEH) get married over the weekend?

• There hasn't been any price talk on Lehman so even if it happens, it's a bit of a crap shoot. Remember Minyans, Bear Stearns was taken over too.
  
  
• There is no doubt franchise value and a lot of smart people at Lehman. There's also a lot of baggage on their balance sheet. It -- like most of the financials -- is a double-edged sword.

TheStreet.com's Jim Cramer says news is not being properly disseminated, and some people are getting an unfair edge.

I love how easily I am misunderstood by people who have about one-tenth the history I have in the markets. I love it, because their dogmatic criticism of me is so unfounded and anti-historical, not to mention totally un-rigorous, that I get a kick out of reading it.

I am talking, of course, about the outrageous trading in Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) over the last few days.

My beef: For most of the last 80 years, when there was "unusual activity" in a stock, as you would certainly have to say there has been here, the New York Stock Exchange or the company or even the SEC would call a halt in trading, the reason being that it is clear there is news that is not being properly disseminated. Halting trading is something that is done to level the playing field, to be sure that some don't know something that others don't.

Here the disinformation has been so ludicrous, the lack of disclosure so ridiculous, the misdirection so nonstop that it is simply inconceivable that everyone has the same information available to trade on. That's the darned law, for heaven's sake. It isn't something I made up. We aren't supposed to have situations where some know information and others don't. Given the nature of the talks involving so many parties and the leaks that are happening left and right, does this feel like a place where the average investor is getting a fair shake? I don't think so. How anyone could even disagree with that notion is the height of naiveté.

It's not clear how big the bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will be but it is becoming clearer who it is for. Yesterday, I appeared on CNBC's Power Lunch to discuss the winners and losers from the collapse in their common and preferred equity. But today, Bloomberg News reports that one of the biggest beneficiaries of the bailout will be the government of China.

In addition to buying most of our consumer goods from China, our government could use as much as $800 billion of our tax dollars to assure that China and other holders of Fannie and Freddie assets don't suffer any losses. Bloomberg interviews Yu Yongding, a former adviser to China's central bank who said, "If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic. If it is not the end of the world, it is the end of the current international financial system."

That sounds like a pretty strong statement to me. I am not sure why Yu made it or what it means. So I will throw in a mixture of fact and fiction to offer my interpretation. Bloomberg reports that China holds $376 billion worth of "long-term U.S. agency debt [which] is mostly in Fannie and Freddie assets." CLSA estimates that the six biggest Chinese banks hold $30 billion worth of such paper, according to Bloomberg. Those are the facts, now comes the fiction part.

I am not sure that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will make it through the month as public companies. Barron's quoted an anonymous senior official -- who sounds an awful lot like Hank Paulson to me -- that unless Fannie and Freddie could raise at least $10 billion each, the government would bail them out while wiping out common shareholders and eliminating the preferred dividend. Since then, investors have been dumping shares of Fannie and Freddie like there's no tomorrow.

Who wins and who loses if Fannie and Freddie's shareholders are wiped out? As I said on CNBC's Power Lunch this afternoon, the winners are investors who shorted Fannie and Freddie years ago and are now reaping enormous profits. I also think that some Wall Street investment banks will win big as they get the job of selling off Fannie and Freddie's pieces. The losers are their biggest common and preferred shareholders -- including some well known mutual funds.

The winners are:

• Jim Rogers, Rogers Holdings - Rogers originally shorted Freddie and Fannie in March 2006 and appeared on Bloomberg on November 20, 2007 to discuss why he did it and where he thought their stocks would go.
• Doug Noland, Prudent Bear - As I posted, since the late 1990s, Noland's research has concluded that Freddie and Fannie would "shudder" when the US credit bubble eventually burst. Noland has profited from the short bets he made -- but he says it is emotionally painful to watch them fail.

TheStreet.com's Jim Cramer says the common would be crushed on a government takeover, but everything else would be saved.

The most important positive that must occur in this economy is for housing to stop going down. It is even more important than oil going down, because it cuts to the core of consumer confidence and credit.

House prices are coming down, but that's not enough. We also need lower mortgage rates, and the spread between the mortgage rates and Treasuries is so high that it's hard to make case that you are getting any sort of bargain at all on the money you are trying to borrow. It should be a great time to buy a house -- no demand, plenty of supply -- but mortgage rates are just too high.

But we all know how they would go down and go down big -- if Treasury took over Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) this weekend. If you back off Fannie's and Freddie's bonds, you get a decline in rates of mammoth proportions. It might make sense to buy a house simply because the rates would be so low.

Henry Paulson is maneuvering himself into the history books by forcing Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) into a spiral of doom from which they can't recover. He had plenty of help from the directors and executives who sit atop them. But it's becoming clear that since Saturday's Barron's article, laying out the path to failure, events are spiraling out of Fannie and Freddie's control.

The anonymous senior government source in the Barron's article said that unless Fannie and Freddie could raise at least $10 billion each, the government would bail them out while wiping out common shareholders and eliminating the preferred dividend. This would lead to a sell off of bad loans, a split into smaller pieces, and maybe selling those pieces back to the public. All these activities are a government gift to Wall Street, which will get to do all these deals.

Events are following this predicted pattern as Fannie and Freddie struggle to raise capital. The New York Times reports that investors are not enthusiastic about the most recent efforts to raise capital by Freddie Mac. It reports that on Tuesday, Freddie Mac raised $3 billion in five-year debt but the "1.13 percentage points [premium] over the rate the federal government pays for comparable borrowing" was more than double the "0.6 points" premium it paid earlier in the year.

Wilbur Ross knows how to spot megatrends. For example, he built a steel empire – by purchasing bankrupt companies – and made billions. Oh, and he also predicted the current credit crisis.

Well, today Ross was on CNBC and provided some sage advice on the current economic morass. In fact, he discussed his straightforward plan on dealing with the credit crunch (which has been effect for about a year so far).



His proposal is called the "good bank, bad bank" approach. Essentially, it means setting up a third-party entity to take bad loans from Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Interesting enough, this was the strategy to deal with the S&L implosion during the early 1990s. And, for the most part, it worked.

According to Ross, the US financial system needs to focus on the good loans – which should stabilize things and lead to more lending. Ultimately, this should spark economic growth and get things back on track again.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

The real estate market is collapsing fast. Why? People borrowed more money than they could repay so they could "buy" houses they could otherwise not afford. And the banks that pushed those loans now find themselves the miserable owners of those death support systems for debt. The banks don't want these economic death traps -- so they'll dump them at a fraction of the price at which they were sold. (The Wall Street Journal reports that in June 2008, Credit Suisse sold a 1,230-square-foot home in Corona, CA for $198,000 that went for $450,000 in December 2006).

Bloomberg News reports some stunning statistics about how quickly banks are taking possession of those houses. U.S. foreclosure filings spiked 55% while bank seizures -- when a bank takes ownership of a house also known as real estate-owned (REO) -- skyrocketed 184%. Bloomberg says that "more than 272,000 properties, or one in 464 U.S. households, got a default notice, was warned of a pending auction or were foreclosed on."

This transfer of titles to banks is contributing to a massive loss of wealth. Bloomberg reports that home prices fell "15.8% in May, the most since at least 2001, according to the S&P/Case-Shiller home-price index." And Bloomberg indicates that 33% of home sellers in the second quarter lost money. Moreover, according to SeekingAlpha, 33% of houses bought in the last five years are worth less than the amount of their mortgages.

TheStreet.com's Jim Cramer says struggling banks can be shorted to oblivion now that the rules won't be enforced.

Memo to the FDIC: Watch your back. The SEC just flipped its allegiance to the bad guys, the guys who want to break not just certain banks, but your bank! That's right, with the scrapping of the emergency rule that eliminated naked shorting, where you don't have to find the stock, and with the end of the vigilance against bear raiding, the SEC may have just caused a run at the FDIC.

I had hoped that the SEC would see that these financials have been manipulated to unreasonable levels, making the confidence in all institutions so low that nobody wanted to give them money. The rule change -- which when you think of it, wasn't much of a rule change as much as an enforcement of the way things are supposed to be, where you actually have to find the stock you sold short first so you don't fail to deliver -- worked!

It gave the system some breathing room. I think the rule change might have saved Merrill Lynch (NYSE: MER) (Cramer's Take) from being shorted into oblivion so it couldn't have done its deal. Lehman (NYSE: LEH) (Cramer's Take) didn't do a deal, those bad boys be back on the griddle now for unknown European exposure. AIG (NYSE: AIG) (Cramer's Take) wasn't protected in the first place and I believe will need to raise $10 billion to $15 billion in the teens to cover its European exposure. Now there's little hope at all for Fannie (NYSE: FNM) (Cramer's Take) or Freddie (NYSE: FRE) (Cramer's Take), as their stocks will be blitzed into oblivion and Hank Paulson will have to start the planning of cash infusions as opposed to what he said last Sunday -- why did he say that, for heaven's sake? Maybe he's too close to John "We don't need capital" Thain from their Goldman (NYSE: GS) (Cramer's Take) days.

One of the many cliches about the stock market is that it's never wrong. Today's triple-digit rise in the Dow Jones Industrial Average shows that markets can be depressed, manic or just pain stupid, sometimes all at the same time.

The depressed part comes from the housing market. Thinking about Fannie Mae (NYSE: FNM), which today slashed its dividend and posted awful results, and Freddie Mac (NYSE: FRE), which posted terrible results and ignored signs that things were going sour, would have been enough to drive the late Dr. Norman Vincent Peale of the "Power of Positive Thinking" fame to drink.

There is no sign that the market has hit bottom. Garage sales are mushrooming in my suburban community as people sell their personal possessions to raise cash. It's really sad.

Mania set in today as investors start to wonder whether lowering commodity prices will give the economy a jolt. Remember that no car or truck was designed with oil over $100 a barrel in mind. The fact that oil is only slightly less insanely high should give no solace to anyone. Fuel got so expensive that people started driving less and began snapping up pint-size Smart Cars, which look to me as safe as a Matchbox car. This is a sign that things are bad -- not that they will improve. Mind you, the smallest wiff of political instability and oil prices will start climbing yet again.

People seem to think that the economy is going to get better through some magic elixir of a second economic stimulus package and drilling for oil. Those ideas are not only stupid, they are dangerous. Unfortunately, quick fixes are not the answer. We have to let the market sort things out. About the best the government can do is figure out a way to cushion the blow.