The bigger they are the harder they fall.

That statement definitely applies to Fannie Mae and Freddie Mac.  Unless you've been under a rock the last week, you've heard about the trouble they're in.

Fannie and Freddie are a big part of why your local bank can offer mortgages. The bank loans you the money to buy your house. But it's going to be a long, long time before they get that back. And, it doesn't take too many mortgage loans before they're out of money to loans. So Fannie and Freddie buy mortgages from your bank. Your bank then has money to make another loan. This keeps a lot more money available for buying houses. It also keeps mortgage rates lower.

I don't think anyone feels good about the steps the government is taking to shore up these two behemoths. This is not how the free market is supposed to work.

But Fannie and Freddie have never really been pure capitalism at work. They are an odd blend of a corporation and the government entity.

Something had to be done now to keep the real estate and financial markets from further imploding. But I think there needs to be a short term strategy, meant to keep the markets calm and functioning and a longer term strategy that looks at the functions performed by these two entities and how those functions are best performed.

My belief is that if Freddie & Fannie weren't allowed to buy any more mortgages, eventually, another entity (and hopefully 3 or 4) would be created to fill that void. So, long term, how do you begin to ease Fannie & Freddie out of the business or at least into a smaller role.

The biggest problem here may be the shareholders of these two corporations. But, given what their stock prices are doing, it shouldn't be long before they are easy pickings for an enterprise that's truly commercial.

Now, does the political will and the creativity exist to envision something different than our current mess?