Aid to Fannie, Freddie May Top Expectations

In addition to pledging capital, the government has offered the companies an unlimited line of credit.

In return for these backstops, Fannie Mae and Freddie Mac each agreed to give the Treasury $1 billion in preferred stock and pay a $100 million a year as a dividend. The companies' boards also turned over control of the firms to the Federal Housing Finance Agency.

The government's backstops are "well above the worst-case stress test that was run," said FHFA director James B. Lockhart III.

Some analysts are skeptical that the federal backstops were ever enough. Joshua Rosner, an analyst with Graham Fisher, points out that the housing decline underway is the worst since the Great Depression, but Fannie Mae and Freddie Mac have not seen most of the resulting losses. So far, these have not even rivaled what was experienced in the most recent bad real estate slump, in the late 1980s.

"If we saw loss rates at those levels, we would quickly eat through the $200 billion," Rosner said. "This is a once-in-a-century flood."

Fannie Mae said this week that home prices are about halfway through their decline. The firm said prices are down 10 percent from their peak in 2006 and likely to fall as much as 19 percent before stabilizing.

There is no certainty that losses will continue to mount at the firms. If the government's efforts to stimulate the economy succeed and the housing market stabilizes, the companies may require little public money.

"Fannie Mae and Freddie Mac are completely exposed to the housing market," said Howard Shapiro, an analyst at Fox-Pitt Shelton. "Until home values stabilize and delinquency trends stabilize, we're going to continue to have this discussion: What are these losses are going to be?"

Without the government's support for Fannie Mae and Freddie Mac, the financial chaos of the past few months may have brought both firms down, which would have badly exacerbated the global crisis.

Several events have conspired to make their conditions worse, including the economic downturn.

Robert Van Order, a finance professor at the University of Michigan and Freddie Mac's chief economist for 15 years, said many borrowers now owe more on their house than it would be worth if sold. "Most people with negative equity don't give up their house," he said. "It usually requires a trigger event. Unemployment could be one of them."

The companies could also be put in a more difficult position because the government is pushing them to keep buying mortgages in a weakening economy. The goal is for the firms to help push down mortgage rates by flooding the market with money, which should help put a bottom under housing prices. But that may force them to purchase mortgages given to buyers with declining economic prospects, including possible job losses.