Collectively they hold $5 Trillion in mortgages. So what is one of the possible outcomes of their problems in the next few weeks? A government bailout! Never mind that it would raise our total government debt by 50%.

Hmm.

You are taking exactly the position that the Bush administration and other major conservatives have taken on Fannie Mae and Freddie Mac.

They are GSEs (government-sponsored enterprises) charged by Congress with keeping housing affordable since they began under Roosevelt (Freddie was added by the Johnson admin to avoid monopolization).

Conservatives hate them because they seem socialistic. But they play a vital role by backing enormous pools of mortgages, especially now given the housing crisis.

If they fail, those trillions of dollars in holdings on middle- and low-income homes would turn into a national nightmare unlike anything we've seen since the Depression.

The mortgage industry turned very scummy after Greenspan bottomed out the rates without proper regulation to fight abuse, while Alphonso Jackson pushed harder and harder to increase homeownership regardless of risk.

IndyMac is an example of a lender that threw out its underwriting for big profits, and should be prosecuted for mismanagement (a civil settlement, at least).

But Fannie and Freddie are actually the good guys (despite multi-billion accounting scandals earlier in the decade). They are the thin blue line between order and all hell breaking loose, unfortunately.

Your post and your subsequent comments clearly emanate from your heart and gut, but the brain serves as editor-in-chief and appears to have been out to lunch at the time. You just don't appear to know much about the complexity of the many subjects about which you are outraged. OK, Bush and Cheney are to blame.

Gee that must have been some extra-strong Kool-Aid this morning. Financial troubles at Fannie Mae and Freddie Mac lead to an excuse for Bush-bashing? This could have been a thoughtful article about the dangers of "corporate socialism" and what to do about it. But no, let's just throw more barbs at Bush & Cheney. I guess that's what you do when you have no real ideas of your own. Now you know why we on the right laugh at you. We know you have some intellect, but drinking the Kool-Aid for 7 years has rotted the brain.

To fail or not to fail seems to be the question. Sadly both political parties were out to lunch for years and regulators as well as rating agencies were more interested in their bottom lines rather than looking out for the American people.
A friend who is a trader on Wall Street commented yesterday, that the entire system is a joke being held together with bailing wire and bubble gum. They should just let the entire system collapse and start over again but this time. getting rid of fiat and backing the dollar with something of value as the Constitution calls for like gold and silver.
Amazing that the Federal Reserve has never been audited by the government. I imagine the founders are all turning over in their graves, but Jefferson said it best.
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Seems like we've really messed up this time. Yes virginia, greed is alive and well in the nations capital.

Weren't a number of banking regulations put in place after the crash of '29 to keep that sort of thing from happening again? And haven't the Republicans been fighting those regulations ever since? And haven't they been able to chisel away at them, little by little over the years? And wasn't 'Government is the Problem' Reagan the answer to their prayers?

And aren't we now paying the price of the Republican attack on regulations put in place
to protect the public from the capitalist sharks?

And isn't History finally repeating itself?

You people are just too much. First we have the pseudo-privatization of Fannie Mae by Democrats in 1968. This was considered a good idea, apparently, because it let the Democrats transfer public debt to a pseudo-private entity. It let Democrats claim that they reduced the government's debt, when all they really did is shuffle it around. But it was only a pseudo-privatization because both Fannie Mae and Freddie Mac are still government-sponsored enterprises (GSEs) which, as Investopedia describes, is:

GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S. Government. For this reason, these securities will offer a yield premium over Treasuries. Some consider GSEs to be stealth recipients of corporate welfare.

And Democrats created this scheme.

And somehow Republicans are to blame?