As everyone knows by now, Congress has just passed a bill basically giving Fannie and Freddie an unlimited line of credit.
But Freddie Mac has decided that the best approach to capital infusion is the stock market. This week they formally registered with the SEC. This is the beginning of a process to issue 5.5 billion in new shares. If investors are willing to take a long view, its possible that we may not have to deficit spend our way out of this crises. Perhaps Freddie realizes that the government doesn’t really have the money anyway. Perhaps they have faith in the long term viability of the system and think many others do too.
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