As people continue to debate the future of Fannie Mae, Freddie Mac and federal government's role in the housing market, they tend to overlook the fact that two GSEs are continuing to reel, and their pain is about to intensify.

Both have narrowed their annual losses. Still, Fannie Mae said it lost $2.1 billion for the fourth quarter; it did make its $2.15 billion in preferred dividends payment to the federal government. Freddie Mac lost $1.7 billion loss for the quarter, although it made its $1.6 billion in preferred dividends.

However, both entities are asking for more bailout aid. Fannie Mae has asked for $2.6 billion in federal aid, compared with $2.5 billion in the previous quarter. Freddie has asked for $500 million, compared with $100 million in the previous quarter. One might be tempted to ask if it would make more sense for the GSEs to hang onto the dividend money, instead of essentially asking for the government to give it back in aid.

In any case, the Associated Press suggests the entities are girding for more pain. The foreclosure fiasco has put many foreclosures on temporary hold. But as the floodgates start to open, the losses will mount. Recall that most assume the bailout ultimately will cost on the order of $260 billion.

Reform cannot come soon enough, but you get the idea that it will take a while to decide how to proceed based on the proposals submitted recently by the administration. Most assume the government's role will decline. It's hard to argue otherwise, given the Fannie and Freddie implosions.

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