The line of the descent now goes from the two US GSEs to the US Treasury and finally to the US Dollar.
Should the very threadbare "confidence" which still remains in the two US GSEs crack further - one potential cause could be the rescue plan being seen as too little too late - the entire problem would arrive on the steps of the US Treasury. A bailout would require a MASSIVE increase in the Treasury's debt ceiling which takes an act of Congress. It would be necessary to push the "ceiling" well above $US 10 TRILLION, which would badly rattle both domestic confidence in the viability of their government's debt and global confidence in the USA itself. If the rest of the world's confidence cracked badly - and it is already waning fast - it would be the international value of the US Dollar which would feel the global impact first. Many foreign holders of US Dollars would start selling them for other currencies, driving many others including central banks to do the same, simply to get something for their US Dollar holdings.
If control is lost here, the result could be a global event in which the global value of the US Dollar is destroyed inside a week. Further, very early on in any global US Dollar sell-off, present international holders of US financial paper of all kinds - stocks, Treasury and Agency debt, commercial bonds and all the rest - would start selling as a precursor to selling the US Dollars gained this way. The US stock and bond markets would go into free fall with huge and sudden rallies interrupting the general decline in prices. When the dust finally cleared, the US would be bankrupt and would be SEEN to be bankrupt.
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