Fannie Mae and Freddie Mac deep in the hole

Republicans, Democrats agree on reform, but not on solutions

**FILE** (Associated Press)**FILE** (Associated Press)
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The mortgage bailout has been costly and unpopular, but he said it was necessary and “played a critical role in stabilizing the housing industry during a period of crisis.”

Nearly all the losses that taxpayers have covered are a result of bad loans that Fannie and Freddie took on during the height of the housing bubble between 2005 and 2007, he noted. That was during the last years of the Bush administration before President Obama took office.

Despite Fannie’s and Freddie’s serious shortcomings, “they are practically the only game in town,” said Mr. Goldstein. Treasury Secretary Timothy F. Geithner has suggested that the government may have to continue providing guarantees on mortgages — for a fee — to keep the market viable.

How much more the mortgage giants cost taxpayers will depend on how the housing market fares in coming months. The agencies already have consumed $148 billion, and their losses are quickening.

An analysis released by their regulator, the Federal Housing Finance Agency, on Thursday estimated that Fannie and Freddie most likely will require another $90 billion in the next three years, assuming the housing market stabilizes and starts to recover next year.

But the losses could worsen considerably if the housing market slumps back into recession and home prices drop another 20 percent to 25 percent. Under that more dire scenario, the agency estimated additional losses at $215 billion.

Some of the cash Fannie and Freddie have drawn from the Treasury has been used to pay dividends on the shares Treasury owns — essentially returning some of the Treasury’s own money.

If those dividends are subtracted, the total cost of the bailout ranges up to $259 billion, the agency estimated.

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