On Sunday I shared some initial thoughts about the Fed take-over of Fannie Mae and Freddie Mac. If you read it, you know I’m not exactly happy about the outcome.  My friend Bithead shared some great thoughts Monday, and I don’t disagree that something needed to be done.   He and I both agree dumping the CEOs was necessary.

And on Monday the Stock Market reacted very favorably to the news, with a huge rise in the Dow (500 points, settling up 289), with a strong positive impact to the banking industry.

But I’m still convinced that the solution divides the interests of those in the government now set to manage the affairs of these companies.  Everyone who looks at this right now is breathing …

Today US Treasury Secretary Henry Paulson announced plans for the new Federal Housing Finance Agency (FHFA) to take Freddie Mac and Fannie Mae into conservatorship.   The power to do this was provided in HR 3221 which was passed in July.

The move includes replacement of the CEO of both organizations, and an infusion of about $200 billion.  In return, the Treasury gets $1 billion in preferred stock from each company without providing the cash for it up front (I’m assuming this will work like a stock option).

From the Wall Street Journal:

It is unclear how much the government’s intervention will ultimately cost taxpayers. In exchange for agreeing to provide as much capital as needed to the companies as they cope with heavy losses on

…

As expected, President Bush signed HR 3221 into law this morning, making billions of federal dollars available to home owners, shoring up Fannie Mae and Freddie Mac, and providing closer oversight of the financial aspects of home ownership to the Administration and Congress.

What a shame.

After speaking with a good friend of mine that is a CPA, the tax incentives, particularly the $7,500 tax credit (a topic which is burning up the search engines at this time), are going to make life harder for tax preparers, tax payers, and probably increase the cost of running the IRS.  As I’ve said before, There are going to be a lot of problems keeping track of this. 

Plus, this is just an unfair competition with banks.  The government …

Well, it took almost 3 months, but Congress finally passed the bill today, on older version of which was  passed by the House in May, after some considerable back and forth between the Senate and the House.  The bill is HR 3221 (pdf), titled: “Housing and Economic Recovery Act of 2008″.

The entire bill is over 600 pages long.  The table of contents is 7 pages.  And technically, this is a bill that began its life over a year ago.  Sponsored by none other than Nancy Pelosi.  And apparently Bush is planning to sign.

He should not.

Touted by most of the media is the section that provides up to a $7,500 tax credit is 1,800 words.  And the  media manage to mention it …