The government is trying to send out Fannie and Freddie in the same way they were deployed back in the Great Depression – the last time credit siezed up this badly. It won’t work this time.

My usual response to the question, “how will the credit markets go back to normal?” is HIGHLY cyncial (so beware):
Massive, drastic and massively drastic tax reform. Most notable features of the tax reform is eliminiation of capital gains tax, privitazaion of social security, abolishment of the estate tax and limitation of mortgage interest deduction to mortgages under the national median home price (sorry CA, Fl, & NY).

A series of booms (including another housing boom) will follow this degree of tax reform as the tax burden is lifted from business and investments and summarily dumped on the shoulders of wage earners and their descendants. Everyone will rejoice and dance in the fields and quickly forget the stresses of 2007-2008. Everything will be wonderful, until that fateful day when the very first barrel of crude is sold with Euro.