Can the Fed prevent a total collapse of the mortgage industry?

Sometimes, it is better to get a UK perspective.

Telegraph UK reported that the US Federal Reserve has accepted $200 billion of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.

This came after an emergency conference call by the Fed governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60 PERCENT of the entire US home loan market. Fannie Mae's share price has already fallen 19 percent in panic trading on Monday after Barron's suggested it may need a rescue package.

Keeping them solvent is a must since they wrap or insure $6 TRILLION in mortgages.

But is it going to be enough?

The Bank of England had to widen their range of eligible collateral. Even the ECB and the Swiss have boosted swap agreements with the Fed.

Will Fannie Mae and Freddie Mac have to be nationalized, as part of a huge government bailout?

After a 400+ point rally in the markets on the 11th, the rally has again fizzled out.

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Of course, a March 2nd article by the Telegraph titled "The Federal Reserve's rescue has failed" showed even worse news. According to recent estimates, we are only halfway through the tsunami of rate resets on teaser loans.

UBS estimates the cost of the credit debacle to reach $600 billion. Some say it could even reach $1 trillion.

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Bear Stearns had to deny news that it was facing a cash shortage. CEO Alan Schwartz stated that they still have a $17 billion cash position. Shares went down 11 percent two days ago based on speculation that the firm, which is the second-biggest underwriter of mortgage-backed bonds after Lehman Brothers Holdings Inc., was running short of funds to cover liabilities.