Wherein We Look Around for a Fannie and Freddie Explanation We Can Understand

acoffee_sm.jpgWe woke up this morning to news that the government had interceded in the Freddie and Fannie mayhem to keep the entire economy from collapsing. Also, the Large Hadron Collider is due to be switched on sometime tomorrow, and the world as we know it might end. Also, Sarah Palin. Of the three Sarah Palin was the only one who caused us real pause for concern. But that might just be because we don’t understand the other two. Fortunately someone explained the former. (As for the latter? Well, fingers crossed we can all meet back here Wednesday morning). Anyway, we’re not going to copy the entire thing here but this’ll give you an idea. Per Radaronline:

In exchange for buying these mortgages, they take on the risk of mortgage default. Uh oh! When mortgages began defaulting en masse, the companies simply didn’t have the money on hand to repay their loans.

And so their heads were summoned to Washington, after a few months of evaluation — the government hired Morgan Stanley to figure things out — and told they could give control to the feds or control could be taken. Morgan Stanley’s team had figured out, “Using assessments about what would happen to the housing market over the next 18 months…that the companies were in need of as much as $50 billion.” (And if you read only one story about how all this went down, read that one.)

And that wasn’t going to happen. In part, because meanwhile, foreign banks, which owned much of the companies’ debt, were calling up the U.S. Treasury secretary in a panic.