By Danny Schechter
Obama seems to have finally recognized that the economy is his issue. He lashed out at John McCain today for “not noticing” whats going on. Both candidates were criticized by NY Times columnist, economist Paul Krugman, for ignoring the issue. Meanwhile, the markets were crumbling as the real estate market remains in decline.

NEW YORK - AP: Wall Street retreated Monday after Fannie Mae and Freddie Mac fell to their lowest levels in nearly 20 years on concerns that the government might need to bail out the mortgage financiers. Weakness in the overall financial sector sent the Dow Jones industrial average down more than 175 points.

ARE BAILOUTS COMING?

The United States Treasury Department may soon be forced to broker a recapitalization package for mortgage giants Fannie Mae and Freddie Mac.

Not only will this move wipe out common stockholders, it may also leave preferred shareholders and others with losses.

The “recapitalization” plan is a failsafe in the case that the government-sponsored giants are unable to raise substantial capital to cover future delinquencies. This plan would act to reestablish stability in the nation?s two largest mortgage-finance firms, but it would do so while continuing to undermine our economy, thus only making the problem worse.

If the Treasury Department chooses to step in it will do so with revenue taken from taxes; and with no plan in place to increase taxes, any money redirected from the tax pool will equate to nothing more than deficit spending.

FINANCIAL TIMES: “Fears about the financial system grew on Monday as money market liquidity tightened and sharp falls in the share prices of mortgage financiers Fannie Mae and Freddie Mac led the US stock market lower. Fannie’s and Freddie’s shares lost 22 per cent and 25 per cent, respectively, after an article in Barron’s suggested that the US government was considering recapitalising the companies on terms that would all but wipe out existing shareholders.” …

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