There's a lot of anger out there over how banks and government officials knew of the potential dangers and never acted to fix the government's role in the mortgage business.
Treasury Secretary Henry Paulson announced Sunday that the government would back Fannieand Freddie Mac after panicky markets grew more worried last week the government-sponsored enterprises may not meet their obligations. See full story.
For the Wall Street banks that bought, built and distorted the mortgage market in which Fannie and Freddie became vulnerable, the reaction was relief. Goldman Sachs analysts said the bailout "should be viewed as preemptive signals that the U.S. government stands behind the companies, but is determined to keep them in their current shareholder-owned form for now."
Other voices were more honest. As Friedman Billings Ramsey analysts put it: "White House jawboning about the desire that the companies remain 'shareholder-owned' seems inconsistent with many conversations we have had with senior government officials, who concede that the companies need to raise capital."
Many in the media shook their heads. Gretchen Morgenson of the New York Times said that the U.S. financial system was being "taken to its knees" and that "somnambulant regulators, greedy bank executives and incompetent corporate directors" were to blame.
Hugo Dixon, writing for Breaking Views, said: "Uncle Same has now underwritten these reckless lenders' activities without a clear plan to rein them in." He conceded, however, that "some sort of rescue had to be mounted."
In the short term, Paulson's bailout seems to have its intended effect. Shares of Fannie and Freddie were sharply higher in pre-market trading.
The government's guarantee has injected some confidence -- at least until the next domino falls.