They own around 5 trillion between them in secured...

They own around 5 trillion between them in secured mortgages..

Not all of this will default. I think S&P (for what their analysis is worth) said that a worse case scenario will see $1.2 Trillion default. I am leaning towards this worst case scenario myself.

Their share price will go towards zero dollars. Debt holders on the other hand will do nicely out of this. Bill Gross (who runs the largest bond fund in the world - PIMCO) increased his exposure to Fannie and Freddie debt after the credit crisis started. Smart move - he knew the government would bail them out.

But just how smart is all of this? The equity markets are partying like that have just had their latest fix but I am waiting to see how the Treasury and oil market will react before we I get too excited.

Everyone thinks this will keep the housing market running and lower long term interest rates...Sure, it will lower the spread between Treasuries and Fannie and Freddie debt, but Treasury yields will tell the real story in the credit markets. I see a lot of money coming out of Treasuries and moving back into oil. I'm not buying the hype just yet....