No wonder Fannie Mae and Freddie Mac are being so aggressive about putting bonds back with the originators. They really can't afford any more losses right now.

According to the latest projection from the Federal Housing Finance Agency, in the most likely scenario--in which prices would remain weak in a weak economy--the total bailout of Fannie and Freddie would cost taxpayers an additional $19 billion. That would lift the total costs to $154 billion, notes the Washington Post. Of course if the economy tanks, the costs will soar. If the economy recovers, costs will be muted.

But this projection, released last week, does not take into account losses associated with foreclosures. So unlike TARP, which might turn a profit for taxpayers, the Fannie and Freddie bailout still looms as a black hole for public funds. For now, the two GSEs will no doubt press to have banks take back more RMBS. They will likely fare better, and banks are already spending more to do this. But ultimately, the "success" of the bailout will depend on the industry and the economy. Meanwhile, the world eagerly awaits the upcoming announcement on the future of the housing GSEs.

For more:
- here's the article

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