I've been asked what my thoughts are about the Fannie and Freddie bailout leaked by the Treasury to the NYTimes and the Washington Post late Friday afternoon.
Since the actual details haven't been released, and you can click over to Tanta and Barry Ritholtz as easily as I can, I suggest you go there for the best exposition so far of the proposed details. In fact, Ritholtz' "The Big Picture" has a pretty good multi-point presentation, which forms the basis for my comments below.
This story is MAJOR, in multiple ways, and almost none of it good, particularly for the long-term. Some points below.

1. The bailout seems to boil down to (1) the government explicitly takes over the mortgage giants (2) largely wipes out their shareholders (3) injects perhaps $500 BILLION into them, and (4) guarantees their debts.

2. The biggie by far is the guarantee of $5 TRILLION of mortgages. You and me, fellow taxpayer, are on the hook. It doesn't matter if we're renters, or are fiscally prudent, never took out a HELOC, never leveraged up to the hilt: too effing bad for you, you are guaranteeing the debt of the people who did. The only good thing here is that Fannie and Freddie were relatively prudent during the housing bubble, and so perhaps only 5% to 10% of their debt may blow up. But that's still $100s of billions you and me and our descendants directly pay out.

3. So much for the government only injecting a few $10s of billions. Only a month after receiving a blank check from Congress, it is being cashed for the first time at perhaps 10x the promised amount!

4. Fannie and Freddie are now under the direct political control of the Unitary Executive Bush Administration. They can reorganize them however they wish. You may wish to brush up on how the Bush Administration has handled Iraq and Katrina, and recognize that this Bustout is maybe 10x as large as both of them combined, to have an idea how that will play out.

5. The aforesaid blank check was handed to the Bush Administration after about 2 days of foreplay (not investigation, not oversight) by a DEMOCRATIC House of Representatives and a DEMOCRATIC Senate. These people, collectively, have shown not the slightest interest in actually protecting average Americans (most of whom were not caught up in the housing bubble), or ensuring even the slightest bit of oversight. Both political parties are in hock to the plutocrats, the middle and working classes are friendless.

6. Our new Chinese creditors have demanded their first payment. Several times in the last week, Chinese officials have stated in no unceertain terms that they would be VERY UNHAPPY if their Fannie and Freddie bonds weren't honored in full. Forget the Fed: US economic conditions are now dictated by the People's Bank of China.

7. This is what happens to debtor countries. Read my prior dairies explaining the book "Bankruptcy 1995." This is only a harbinger of national debt peonage to come.

8. Disaster Capitalism and "The Shock Doctrine" have come to Wall Street. Readers of Naomi Klein's book recall the thesis that Chicago School type right-wing privatizations happen during real or conjured economic emergencies, and are usually enacted by executive fiat. With the exception of New Orleans and Katrina, until now the recipients of those "shocks" have been third world nations. With this crony capitalist bailout, for the first time Main Street America is the recipient of the Shock Doctrine treatment, treating average Americans exactly as American plutocratic overlords treated Argentinians, Brazilians, South Africans, Russians, Poles, Peruvians, and countless others in the last several decades. You should expect much more of this in the next several years. (Just wait until the World Bank and the IMF demand the dismantling of Social Security and Medicare in order to approve a bridge loan to the US government).

9. It is good to be Bill Gross. Bill Gross of PIMCO has been nakedly "talking his book" for the last couple of months, insisting that the Feds must bail out Fannie and Freddie. Yesterday on CNBC he explicitly said he was unable to comment on this bailout (meaning he had inside knowledge). It must be nice to get Uncle Sam to bail out bad investment decisions. You and I can't do that.

10. Libertarians are Stupid. They always trumpet free market capitalism on the way up, but they never see the bailout for billionaires coming when the sh*t hits the fan, do they? And the bailout ALWAYS comes.

I'm sure there is more, and I'll comment more once the actual terms of the bailout are released (although I suspect even then there will be escape clauses allowing for Treasury secrecy). In the meantime, drowning your intellect with the intoxicating beverage of your choice is not a bad thing. Sometimes abject despair is the appropriate reaction.

UPDATE: Another important consideration is to ask, exactly why did this happen? The chronology, and who benefits, is important. What really happened will turn your stomach when the truth is exposed in a few years, imho.

Ask yourself this: what has happened to Fannie and Freddie materially since July?

Answer: Nothing. They are in basically the same shape. And the stock market isn't imploding since then either. It is basically where is was 2-3 months ago.

So, why the "bailout" now?

Ask yourself, "who benefits?"

And there is your answer.

At the end of June, there were wild rumors - in the European, not US press (how convenient?) - about the US financial system imploding in a couple of weeks (MidtownG wrote a very interesting diary describing those rumors if you recall).

In July, based largely on those rumors, the stock market declined significantly. Then, out of the blue and for no particular reason, a Wall Street I-bank, using accounting that everyone agrees is not apposite, called Fannie and Freddie insolvent.
The very next day, a former Fed official, now with the Cato Institute, and a long term opponent of Fannie and Freddie, chimed in and agreed Fannie and Freddie were on the verge of insolvency.

Short interest in Fannie and Freddie exploded (much of this was most likely illegal "naked" shorting). Fannie and Freddie's value collapsed in a couple of days.

Within the week, the Bush Administration went to Congress and asked for a blank check. Congress obliged. For those of you who read it, you should be strongly reminded of other incidents described by Naomi Klein in "The Shock Doctrine."

As soon as the "crisis" passed, suddenly the Bush Administration was interested in preventing "naked" shorting. BTW, "bear raids" which are shorting a stock and spreading rumors of e.g. insolvency are crimes.

Authority in hand, the Bush Administration has now taken complete control of Fannie and Freddie.

That, in my opinion, is what really happened here.