With $11 billion in losses on their collective heads since the credit crisis began, Fannie Mae and Freddie Mac are facing the possibility of becoming an all-out failure. The New York Times reports the White House wants the government to take over one or both of the companies if things get worse. Fannie and Freddie would be place in a conservatorship and their share would be worth little or nothing. Any losses on mortgages would be paid by taxpayers.
Could this really happen? Former Federal Reserve President William Poole says there's a good chance it could:
I think that the federal government almost certainly will back them up. I believe that the federal government ought to back them up because failure to do so and failure to make clear that the federal government will do so, raises the possibility of an enormous worldwide financial crisis that just must not be allowed to occur.