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recapitalize them,

Once he said this, Forbes was accepting the bailout, and the rest is boiler plate. It doesn't matter how many pieces the $1,000,000,000,000 is split into, it's still going to cost that much.

There is no business model in making and packaging bad loans. What happened over the last 10 years was a complete government takeover of the home mortgage industry, and a business model of making very bad loans and reselling them. A private business can't run that business model without folks eventually going to jail.

Going back to 20% down payments with income verification means that the housing market drops 50%. Because that's the proportion of Alt-A and other sub-prime mortgages over the last couple of years. But selling 20% down/income verified loans is the only profitable business model here.

And rates have to go up.

Rates need to go up, because no private business is going to be allowed (or should not be allowed anyway) to run with as much leverage as Fannie/Freddy used.

Rates need to go up for a private company, as they won't have access to the same special loan window used by Fanny/Freddy.

Rates have to go up, as everybody in the world thinks the market is riskier than past assumptions.

Rates have to go up, as we are going to have a big round of inflation to cover the $1,000,000,000,000 loss.

The bit about 'recapitalize' probably means some government regulation to make sure that the new money isn't wasted by the new companies, and to make sure the new companies stay capitalized. And, what do you know, we are back to the horror movie "Fannie and Freddy have Kids!".

As for giving the previous shareholders warrants, I suggest giving them a splintery stick and instructions on where to put it.

You are right. We know what we need to know, the money is gone. The rest is all about protecting somebody elses butt, not yours or mine.