TheDC analysis: America’s hidden debt

So how much money will ultimately be needed to make Fannie and Freddie whole? That depends on how much their assets are actually worth. In June, the New York Times reported that the enterprises were taking an average loss of over 40% every time they sold a property. The government hopes that by extending its life support operations indefinitely, more and more Americans will eventually be able to pay their bills and the GSEs will be able to simply hold most of their assets to maturity, many years down the road. But hope is not a budget item, and deteriorating economic conditions suggest that total losses will continue their march towards the imposing trillion-dollar mark that publications including Bloomberg and Business Insider have said could be breached.

Such a price has been given an appropriate label by Edward Pinto, a former chief credit officer at Fannie Mae. Addressing the possibility of a full commitment to cover every last cent owed by Fannie and Freddie, Pinto said simply, “It is the mother of all bailouts.”