Wall Street Journal editor Paul Gigot today published a terrific explanation of the battle over Fannie Mae and Freddie Mac waged by the political left and right. In this editorial, Gigot explains how liberal Congressmen and journalists pushed the quasi-public mortgage banks' agenda, and the extent that the two organizations went to bully their opponents.

Fannie and Freddie's ... unique clout derives from a combination of liberal ideology and private profit. Fannie has been able to purchase political immunity for decades by disguising its vast profit-making machine in the cloak of "affordable housing." To be more precise, Fan and Fred have been protected by an alliance of Capitol Hill and Wall Street, of Barney Frank and Angelo Mozilo.

This article is a must-read no matter what side of the political spectrum you are on, as it explains a lot about how the two organizations rose and fell. Meanwhile, you should also check out a column written by former FNM chief executive Franklin Raines in the Washington Post.

He argues that the government should not bail out the two mortgage securitization titans because ...they don't need the money. Interesting piece indeed.

Understanding the battle over Fannie and Freddie is critical to understanding the current world credit crisis, as these two organizations were responsible for securitizing trillions of dollars worth of U.S. mortgages. If we can understand the level of corruption, mistakes and incompetence that lies at the heart of credit derivatives, we can better determine how to lay out bets as traders and investors. When you read between the lines of these two op-ed pieces, you can see that the battle has just barely begun to engage in a meaningful way, and as a result it's clear we are going to be able to trade the banks and brokerages from both the long and short side over the next year. My Trader's Advantage subscribers have already made money on trades with longs and shorts in the financial sector, and I'm looking for more right now.