Fannie and Freddie gravitated to the securities as yields on agency mortgage bonds often fell below the cost of selling their debt. In 2006, AAA rated securities backed by subprime or second mortgages averaged 0.57 percentage points more than U.S. Treasuries, according to Lehman Brothers Holdings Inc. index data. That compares with 0.48 percentage points for fixed-rate agency mortgage securities.

Understanding this one takes a little understanding leap. Fannie and Freddie buy mortgages. What we didn't know was they were also buying mortgage backed securities or in this case, bonds backed by the same mortgages they'd already bought! There ain't no fixin' this one. They bought the same bad mortgages. TWICE!

Fannie, Freddie Subprime Spree May Add to Bailout

The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks — Goldman Sachs and Morgan Stanley — to change their status to bank holding companies.

The Fed announced that it had approved the request of the two investment banks. The change in status will allow them to create commercial banks that will be able to take deposits, bolstering the resources of both institutions.

This is the death knell for the markets. What Morgan and Goldman will do in the morning is call their holders who have substantial holdings in their accounts and say to them, "We expect the current downturn to continue, and recommend that you place $100K into a commercial account with us now that we have this nice commercial bank attached. That amount will be FDIC insured, 100% protected, and we'll even give you a nice interest rate on the deposit." Their customers, scared out of their gourds by last week, will do so and the move will make the downward prediction self fulfilling.

This is a sound individual move for Morgan and Goldman, it shores up their liquidity problem, their cash holdings increase, but a disastrous move for the markets at large as the money flows out of the markets and is not reinvested in something else in the markets. It is an outflow with no corresponding inflow. It's a trigger event for 1-800-RUN.

Stack on top of it the current refusal (and wisely so) to hand a blank check to the White House on how to resolve the market crisis, and you have a recipe for catastrophe. It should not be as enormous a wreck as handing over the black check, but buckle up.

Last major investment banks change status - Yahoo! News

Here’s what McCain has to say about the wonders of market-based health reform:

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

Does anything more really need to be said? Sure! How about, "Are you kidding me?" Turn health care into financial fiasco part 2 ? Way to go McBrain...

McCain on banking and health - Paul Krugman - Op-Ed Columnist - New York Times Blog

The McCain campaign has cited the proximity of Alaska to Russia as evidence of her international experience.

Hagel scoffed at that notion.

"I think they ought to be just honest about it and stop the nonsense about, 'I look out my window and I see Russia and so therefore I know something about Russia,'" he said. "That kind of thing is insulting to the American people."

Thank you Chuck Hagel

"Our findings suggest that the surge has had no observable effect, except insofar as it has helped to provide a seal of approval for a process of ethno-sectarian neighborhood homogenization that is now largely achieved," Agnew's team wrote in their report.

Well not quite, it seems to have been the capstone of ethnic cleansing in Baghdad.

The Surge Did Nothing

"We confront a perception problem, which we have to fight every day -- that the Republican Party is not for working people or immigrants," said Jim Hyland, a rally organizer and chairman of the Fairfax County Republican Committee. "The only way that we can battle that is to take the fight directly to the people in these communities, spread the word that the Republican Party represents more of their views than the Democratic Party."

Hyland said he expects as many as 1,000 supporters to turn out for the event at Edison High School, where former senator George Allen...

Macaca, he of the confederate flag and noose in his office, is the headliner for the minority event in Virginia? Yeah, that's going to be a big hit.

GOP Rally Reaches Out To Minorities - washingtonpost.com

In it, two World of Warcraft players discuss a raid on the "White Keep" inside the "Stonetalon Mountains." The major objective is to set off a "Dragon Fire spell" inside, and make off with "110 Gold and 234 Silver" in treasure. "No one will dance there for a hundred years after this spell is cast," one player, "war_monger," crows.

Except, in this case, the White Keep is at 1600 Pennsylvania Avenue. "Dragon Fire" is an unconventional weapon. And "110 Gold and 234 Silver" tells the plotters how to align the game's map with one of Washington, D.C.

HAHAHAHAHA! Yep, let's talk in code in WoW. Give me a break.

Pentagon Researcher Conjures Warcraft Terror Plot | Danger Room from Wired.com

But Whalen said the Federal Reserve, the Treasury and Congress should "immediately devise" and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.

It's 1929 all over again. Next up WaMu, GM, Ford, and let's go out on a limb and say... Starbuck's (five bucks for a cup of coffee?).

The Associated Press: Federal bank insurance fund dwindling

WASILLA, Alaska — In 2000, Alaska lawmakers learned that rural police agencies had been billing rape victims or their insurance companies $500 to $1,200 for the costs of the forensic medical examinations used to gather evidence. They quickly passed a law prohibiting the practice.

According to the sponsor, Democrat Eric Croft, the law was aimed in part at Wasilla, where now-Gov. Sarah Palin was mayor. When it was signed, Wasilla's police chief expressed displeasure.

"In the past, we've charged the cost of exams to the victims' insurance company when possible," then-chief Charlie Fannon told the Mat-Su Valley Frontiersman, the local newspaper. "I just don't want to see any more burden put on the taxpayer."

What the hell??? "Hi, you got raped, here's the bill." Then chief Charlie Fannon was brought into the job by Palin, and Palin was mayor from 1996-2002. Burden on the taxpayer to STOP RAPISTS? What is WRONG with these people???

Palin's town used to bill victims for rape kits - USATODAY.com

GIBSON: Do you agree with the Bush doctrine?

PALIN: In what respect, Charlie?

GIBSON: The Bush -- well, what do you -- what do you interpret it to be?

PALIN: His world view.

GIBSON: No, the Bush doctrine, enunciated September 2002, before the Iraq war.

PALIN: I believe that what President Bush has attempted to do is rid this world of Islamic extremism, terrorists who are hell bent on destroying our nation. There have been blunders along the way, though. There have been mistakes made. And with new leadership, and that's the beauty of American elections, of course, and democracy, is with new leadership comes opportunity to do things better.

GIBSON: The Bush doctrine, as I understand it, is that we have the right of anticipatory self-defense, that we have the right to a preemptive strike against any other country that we think is going to attack us. Do you agree with that?

Oh THAT Bush Doctrine! Except Charlie, that's not the Bush Doctrine. Pre-emption has been considered acceptable. It's PREVENTATIVE that you want. Asking the question when she has no idea what the hell Charlie is talking about is amusing (and quite frightening) but when Charlie, asking the question, gets wrong what it is as well, that's really scary and explains why I consider Charlie Gibson a tool.

ABC News: EXCERPTS: Charlie Gibson Interviews Sarah Palin