Fannie Mae 'the mother of all bailouts': report
Why the government doesn't dare let Fannie and Freddie fail
"The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history," reports Bloomberg LP here.
"By delaying action, the Obama administration keeps losses off the government's books while building a floor under housing prices during a congressional election year."
Fannie and Freddie losses will grow if home prices keep falling. But "allowing the companies to go under and hoping that private financing will fill the gap isn't realistic, analysts say." For one thing, the US economy still depends on housing. For another, it would cause huge losses to US and foreign investors who thought Fannie Mae and Freddie Mac debt was as good as US Treasuries.