U.S. Projects Aid Tally for Mortgage Giants

By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, May 12, 2009

The Obama administration has clarified what it expects the takeover of Fannie Mae and Freddie Mac to cost taxpayers: $171.1 billion.

Budget details released by the administration yesterday project that the companies are likely to need $92.2 billion more to cover losses on mortgage-related investments. The administration didn't give a timetable for this taxpayer assistance but the spokesman for the Office of Management and Budget said it is anticipated sometime before Sept. 30, 2011.

Fannie Mae and Freddie Mac have already received or requested $78.8 billion in aid as losses have mounted. The government seized the firms in September out of concern that their failure could destabilize the global financial system.

District-based Fannie Mae posted a $23 billion loss last week, prompting a $19 billion government investment. McLean-based Freddie Mac is expected to report its earnings this week.

When it took over the firms, the government pledged $100 billion for each company to keep them solvent. Since then, the government has increased its commitment to $200 billion each.

Some analysts have said that the companies might need more than $100 billion apiece if the housing and economic downturns persist. Fannie Mae's latest earnings report reflected a troubling trend that losses were spreading from risky borrowers to safer ones.

The Obama administration's budget document also outlined the possible fates of the companies, including returning them to their status as government-charted public companies controlled by private management or "a gradual wind-down of their operations and liquidation of their assets."

Other possibilities, the document says, include turning the companies into a federal agency or a public utility.

"The Administration looks forward to working with the Congress, the regulatory community, and the mortgage industry to determine the best possible long-term role for Fannie Mae and Freddie Mac," the document said.

The administration has not clarified its view on what the future structure of the companies should be.

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