I agree that the GSEs needed to be taken over, ONLY because these bonds are in ALL our investments. Our banks own them, our pension plans own them, our insurance companies own them, our brokerage firms own them, our money market funds own them, our cities own them…you get the picture.
That being said, the bondholders should have been made whole (or close to it), but the subordinated debt, preferred and common shares should not have been made whole (with some exceptions, perhaps…and these are also owned by “everyone”).
If the GSEs were taken over and wound-down (with bondholders being paid par or close to it), I would not have as much of a problem with it.
Problem is, they want to make it “temporary” and then send them back into the private market **when they are profitable again and the risks are gone!!!** This is what ticks me off.
God forbid the taypayers might actually get PAID (via lower taxes and/or deficits) for all their sacrifices/risk-taking and the GSEs might actually MAKE money when the govt owns them! They should NEVER be returned to the private market. The only reason they existed was because of the implicit (now explicit) backing of the U.S. govt. They could borrow money more easily and more cheaply, and keep the mortgage market more liquid.
If they no longer have the backing of the govt (in any form), they will be no different than a regular, private mortgage lender, and do not need to exist as GSEs. If they have any kind of backing, then they should be wholly-owned by the U.S. government (and all the rules and strict regulations that go with it) and the govt should get the profits during the good times if they (we) take the risks during the bad times.
