When Dexia is solved, go ahead and buy? What happened last time?

What actually happened in 08 when Fannie and Freddie got nationalized? Initially the markets traded up slightly, but that proved to be the last little leg up, before we got the final collapse with Lehman falling shortly therafter. With Short Interest at elevated levels, people must first cover, before the leg down can start. First circle, fall of Fannie and Freddie (and later Lehmans), but this time is different.

FNM

Don’t forget, too many shorts need to cover before we can start the leg down.