The saga of Fannie Mae and Freddie Mac due to the bursting of the housing bubble created by the national avaricious, sky's the limit cabal of the real estate industry, including appraisors, developers, and the mortgage lending and investment institutions, continues.

All of these were aided and abetted by the deregulatory, hands off any way they can make it corporate profits policies of this criminal Bush administration.

Economist Dean Baker of the Center for Economic Policy and Research (CEPR) wrote an excellent article about the conditions that should be required of Fannie and Freddie for taxpayer support.

Here are some highlights, but go read the entire piece.

"The collapse of the housing bubble, however, has created extraordinary circumstances where even prime mortgages are going bad at very high rates. As many mortgages in former bubble markets sink further underwater, Fannie and Freddie now own or guarantee mortgages on homes that will lose in the neighborhood of 50 percent of their value. 

"Fannie and Freddie both contributed to the bubble and created the financial crisis that they now face. These mortgage giants continued to make loans in bubble-inflated markets, thereby supporting purchases at bubble-inflated prices. Their top economists insisted that there was no bubble, assuring others in the market that everything was fine.

"With Fannie and Freddie now supporting almost 70 percent of new mortgages, it is essential that they stay in operation. However, it is reasonable to insist on stringent conditions for taxpayer support. 

"First, the managers who were too incompetent to recognize the largest housing bubble in the history of the world should be replaced. The public should not be asked to pay six, seven, and even eight figure salaries for people who cannot do their jobs.. 

"Second, compensation should be sharply limited, topping out in the neighborhood of $2 million annually. Compensation in the financial sector has exploded with no obvious gain in performance. The bailout of Fannie and Freddie and other financial institutions provides an opportunity to rein in outlandish pay. Most economists recognize the growth in wage inequality over the last three decades as a serious problem. The federal government should not make this problem worse by effectively subsidizing the salaries of some of the highest paid managers in the country. 

"Third, to ensure that public funds are used to stabilize distressed markets, rather than slow the deflation of bubble markets, Fannie and Freddie should be required to limit their mortgages to a reasonable multiple of market rent for an area. As home prices inflated, rent never grew out of line with market fundamentals. By adopting rent-based appraisals of market value, Fannie and Freddie can ensure that their loans reflect a house¢s value, regardless of whether it is in a bubble market or not. 

"Finally, in the wake of the bailout, Fannie and Freddie should be put into a receivership arrangement and run as fully public companies. Whether they are restored as partially private companies can be debated by Congress while the two companies are restored to solvency.

"The failure of the economists and managers at these institutions to recognize the housing bubble earlier has proven enormously costly to the United States and the world economy. The conditions of any bailout should protect the public from further losses by holding management accountable for their irresponsibility, reining in executive pay and creating reasonable standards for future lending."