Thread: Fannie Mae, Freddie Mac Rescue Could Cost $25 Billion

That's $200,000,000,000 divided by 200,000,000 Americans equals $1,000 per man, woman, and child or roughly $3,000 to $5,000 per household.

That is the result of the US government forcing banks to make loans to persons who are not credit worthy then insuring those loans against default using the taxpayer's money.

Fannie Mae, Freddie Mac Rescue Could Cost $25 Billion

By Lori Montgomery
Washington Post Staff Writer
Tuesday, July 22, 2008; 11:20 AM

The Bush administration's plan to rescue ailing mortgage-finance giants Fannie Mae and Freddie Mac is likely to cost about $25 billion during the next two years, according to congressional budget analysts.

In a letter to lawmakers released this morning, the Congressional Budget Office said there is "a significant chance -- probably better than 50 percent -- that the proposed new Treasury authority" to lend Fannie Mae and Freddie Mac money or buy their stock would not need to be used before the authority expired at the end of 2009.

However, "that scenario is far from the only possible result," the letter says, and the cost estimate takes into account "the probability of various possible outcomes." That means rescuing the mortgage firms could cost significantly more than $25 billion if the authority is exercised, the letter says.

The CBO's cost estimate has been eagerly awaited by lawmakers, who are expected to vote this week on the administration's plan to prop up the mortgage giants if their financial situation deteriorates dramatically.
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The proposal is being included in a broader housing bill that also seeks to save hundreds of thousands of families at risk of foreclosure, enact tax breaks for first-time homebuyers and create a strong new regulator for the government-sponsored mortgage firms.

Speaking in New York earlier today, Treasury Secretary Henry M. Paulson Jr. urged Congress to quickly approve the proposal for Fannie Mae and Freddie Mac, saying that their continued operations are "central to the speed with which we emerge from this housing correction," the Associated Press reported.

"Because of their size and scope, Fannie and Freddie's stability is critical to financial market stability," Paulson said. "Investors in our nation and around the world need to know that we understand how important these institutions are to our capital markets broadly and to the U.S. economy."

Also during a question and answer period, Paulson said that housing is at the "heart of our nation's economy," the AP reported.

I think this is ridiculous. Are they also going to bail out all the struggling contractors, coffee shops, food vendors, etc...?

the theory i guess is if they can help the housing sector it should shore up these other industries. I don't buy it.

I made a mistake in my arithmetic above but the debt burden per house is still huge.

The federal government is saying the budget deficit next year will be $350 billion. That means that it will actually be about three times that high.

Warren Buffet publicly stated that it was "game over" for Fannie and Freddie. We'll see what happens.

By the way, are you sure it's only $25 billion? I would assume that they finance trillions of dollars worth of loans. It sounds like that number should be multiplied by 2 or 3.

Its going to be pretty expensive. I hear that fannie mae and freddie mac provide insurance for 5 trillion dollars in loans. So if they go south now the government provides insurance for 5 trillion in loans. As a taxpayer I am kind of hoping a lot of those loans dont go south.

I just read an article on living lake chapala .com that think that many people may turn to mexico for housing .... any thoughts?

Well.. The clock has moved forward a couple months since this original thread began. Look what we ended up with... a $700 Billion bailout package on top of all the other bailouts - fannie, freddie, AIG, short term lending and the list goes on.

If your business is struggling do you suppose you can call a Govt. Hotline for your bailout?

Not just that they cost us a crazy amount of money but they caused a recession! Thank you Fannie and Freddie!!
But i shouldn't be unfair, they where not the only ones who cause this disaster we r having now ...