It's been a wild ride so far!

The last month has been an amazing time to watch the financial markets. More and bigger changes have occurred among the major players in the US financial system than in the previous generation.

A quick recap:
The Federal government took over Fannie Mae and Freddie Mac, effectively nationalizing the US mortgage market.
Lehman Brothers goes bankrupt.
The US government buys 80% of one of the largest insurance companies, AIG, in exchange for an $85 billion loan.
Bank of America acquires Merrill Lynch.
After a run on deposits, Washington Mutual is taken over by Federal regulators and is sold to JP Morgan Chase. This is the largest bank failure in US history.
Just prior to failing, Federal regulators engineer a deal for Citibank to take over the banking operations of Wachovia bank.

While all that was happening, the last two major independent investment banks, Morgan Stanley and Goldman Sachs, decide to rewrite their charters to change to more ordinary commercial banks. This move will require them to continue the process of deleveraging that has been going on all year, and will also require them to accept a much higher level of regulation than they have previously had to deal with.

What else happened last week? Oh yeah, after the House rejected a $700 bailout of the financial markets, the Senate passed a sweetened bill, and the House accepted that. So now the Treasury is going to directly own $700 billion in mortgage packed securities. Since these will be distressed assets (otherwise why sell them to the bailout fund), it is likely the government will own mortgages with a face value of well over a trillion dollars.

So, while competition in the banking sector is being dramatically reduced, and the investment banking industry is essentially eliminated, the Federal government becomes the largest player in the mortgage market.

I thought we were supposed to be the guys who believed in free markets.