When the Chinese saw the first reports on the rescue of Freddie Mac and Fannie Mae, they must have been elated. The Americans had recognised the seriousness of the US banking system crisis and had acted boldly. The enormous investment the Chinese have in the loan stock of the two mortgage insurers was “safe” – the Chinese would do well.

Then the potential long-term danger of the situation unfolded. It was not a full rescue but a “quasi rescue”. Alan Kohler explained how it works earlier today (Unambiguously in Crisis, September 8).

Kerry Killinger, who helped build Washington Mutual Inc. into the nation's largest thrift and then presided over its rapid decline, is being ousted as chief executive, making him the latest casualty of the mortgage crisis.

Oh, he's a casualty. Poor baby! Don't worry he'll get by somehow:

People close to the situation said Mr. Killinger would retire under the terms of his employment contract with no extra severance benefits. According to the most recent Securities and Exchange Commission filing related to Mr. Killinger's compensation, he held 1.2 million shares of common stock as of Dec. 31, 2007, currently worth about $5.2 million. He also has $14.9 million in deferred compensation and $3.5 million in pension benefits, according to the filing.

Here's the new guy:

Succeeding Mr. Killinger will be Alan Fishman, currently chairman of New York commercial mortgage broker Meridian Capital Group. Before joining Meridian in 2007, Mr. Fishman was president and chief operating officer of Philadelphia-based Sovereign Bank, the nation's second-largest thrift.

Although Downey touts this as addressing "concerns," the OTS does not act unless action is necessary, and regardless of pleadings of "substantial progress" this merely suggests Downey's inability to completely and immediately comply with their marching orders. The OTS has not been known to deal in "mere formalities."

Only US Treasury bonds are keeping pace with the dollar, achieving a gain of their own – and therefore pushing bond yields lower – as the almighty dollar destroys all other comers.

That only confirms our suspicion here at BullionVault that the new "Super Dollar" lacks a certain something. Namely, it lacks strong interest rates.

Good weekend reading, regarding the miracle "dollar rally".

The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

Gosh, ya think? We have been harping on this the whole year. Remember when OFHEO suddenly reversed-course and allowed Fannie and Freddie to reduce their capital by 30%? That move is looking pretty dumb right about now. We cried foul... most of the mainstream cheered.

The U.S. Treasury is expected to announce early Sunday afternoon details of a plan under which regulators will effectively take temporary control over government-sponsored mortgage investors Fannie Mae and Freddie Mac.

The Federal Housing Finance Agency, Fannie and Freddie's regulator, is to use its legal powers to put the companies under conservatorship. Those powers allow the FHFA to run the companies indefinitely, under certain conditions, such as when the regulator finds that they are likely to be unable to meet their financial obligations. Fannie and Freddie have run up combined losses totaling about $14 billion over the past four quarters and face heavy additional losses amid the worst surge in U.S. home-mortgage foreclosures since the 1930s.