There have been two economy shattering domestic USA events during my lifetime. The first in August 1971 was President Richard Nixon's taking the US fiat dollar off the gold standard. Nixon replaced gold with the nebulous phrase "full faith and credit" of the USA. and the result has been as predictable as it has been lethal. The second event happened in the last 72 hours, or on Friday September 5th, 2008. Of course it happened after the rigged stock markets had closed.

And of course we are "assured" it is really a good thing. The system protecting us etc. etc. etc.

At least that is what both Presidential candidates tell us, Barney Franks the head of House financial services committee tells us; even that lout Paulson, our pathetic Treasury Secretary. Paulson has bounced from economic outrage to economic outrage like a demented car in a demolition derby horror movie. I guess that is what happens when you let a Wall Street flunkie become the US Treasury Secretary. A classic example of letting the inmates run the insane asylum. About the same time the US whore media was reporting the salvation of both Fannie and Freddie, by destroying the stockholders, Hugo Chavez had his cronies vote to seize the fuel distribution system in Venezuela. He gave the oil companies 60 days to sell out and then he would seize their assets. Here we have a communist, Chavez, who at least allows the oil companies to get some equity back, while we have the USA's Paulson openly seizing stock without compensation. The USA has acted like a communist country. Venezuela's Chavez at least talked to Castro who told him how to avoid ticking the transnationals off when you nationalize corporate assets. I guess Paulson figures that since no foreign government assets were seized he can screw the rest with impunity. To paraphrase George Orwell, "not all assets are equal."

One of things that amazes me about modern America is not only the insolence of the elite, but their brazen flaunting of it. The elite has just seized, nationalized one half of the USA home mortgage market. The elite has just destroyed billions of dollars of equity. They have just screwed the American taxpayer to the nth degree. But you would not have a clue to any of this by watching the mainstream press. Whatever.

Here at the Q files I will attempt to give you some perspective in this essay. For starters, go back and read my "Perils of Fannie Mae" essay. I have been following the ongoing collapse of these GSE, government sponsored entities for several years now. Then read my other recent essay "WAMU the Killer Bank." It was posted about 10 days ago and discussed Washington Mutual bank. The Wall Street Journal is reporting their CEO is being forced out. This is happening one week after my essay highlighting the very dangerous conditions at WAMU, and the very same weekend of the Freddie and Fannie Mae rescue. Nuff said I think.

The Federal Reserve issued on Sunday September 7th a statement saying that "although many banks have Fannie and Freddie stock, both preferred and common in their portfolios" yada yada yada. The problem is "limited" to smaller banks which have used this stock to maintain their reserves. Yada, Yada, Yada. The mere fact the Federal Reserve had to issue this statement tells me many banks have suddenly found out the stock they counted on to maintain their reserve balances is now worthless. Like WAMU for instance?

Moving deeper into the swamp, we are told the Treasury will buy $5 Billion dollars of Freddie and Fannie Mae stock. The other number batted around is some $223 Billion in stock. I am unsure exactly what that number means. Fannie and Freddie's stock has lost 90% of its value in the last year. In fact, they have lost a lot of value since Friday afternoon. The stock has no economic value at this point, especially since it can't be traded. Only certain types of stock will be bought by the FEDS. The rest is road kill. You may sure the foreigners and the central banks won't be unduly distressed. This is the whole point of the bailout: women and children last, fat cats to the head of the line. The US Treasury's treason is to sacrifice domestic stock owners at the expense of the foreigners. I understand why they have done this, but treason is treason.

Besides the open communist seizure of private assets, stock, without compensation we have several other issues here. The first is simple: why stop with Fannie and Freddie Mae stock. Now that the concept of communist seizure of assets has been accepted, the New York Stock Exchange is meaningless. One of the points of American capitalism was the rule of law. One of the points of American capitalism is when you bought "stuff", either land, or stock, or whatever you were protected against arbitrary seizure. The idea of being protected against unjust liability is the very foundation of our economic system. Or at least it was until this weekend. Government has been moving in the direction of what I call insolent seizure for some time now, with the drug wars etc. etc. etc. Now they have simply codified it with the open seizure of Fannie and Freddie.

I will tell you openly, the rule of economic law has ended in the USA. Say what you will, the open seizure of Fannie and Freddie by the US government, without cause or recourse, and the destruction of private equity is the Rubicon. We shall not go back from this point. It is kaput.

I will need to write more essays on this in the future I think. Suffice it to say, the bailout is not for $5 Billion, or even for the $223 Billion. I am afraid the US taxpayer is on the hook for the entire 5 TRILLION dollars of home mortgages Fannie and Freddie issued. The home mortgages that are, at best, worth between ten and twenty percent of that. We are looking at a bailout in the 4 TRILLION dollar range. On top of all the other bailouts looming over the US taxpayer. It will be interesting to see if the pension plans, foreigners et all make the same judgment I have; namely, legal protection for private asset value was ended by the US Treasury this weekend.