Plunge Protection Team intervenes again

On Friday during market hours, a rumor went round that Helicopter Ben Bernanke was giving Fannie Mae and Freddie Mac access to the discount window, which would allow them to borrow huge amounts of money.

The market rallied.

After the close, the Fed denied the rumor. But this sure was a convenient way to force a market rally. The Plunge Protection Team strikes again. My guess: they’ll spend the weekend trying to figure out how to save Fannie, Freddie, and Lehman.

And won’t succeed. Lehman is probably toast while Fannie and Freddie own or guarantee $5 trillion in debt so, while they might be too big to fail, they might also be too big to bail out.

Disclosure: I own puts on Lehman and other financials.

(Cartoon courtesy of BlueWire Studio.)

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