While the big banks seem to be on the mend, slowly anyway, Fannie and Freddie are sinking further into the morass of the credit crisis. You have to wonder how they might be salvaged. Business Week explores the idea of a bad bank to hold all those bad mortgages, with the goal of unwinding them over time.

The article notes however that the same issues that felled the idea for top banks remain. Who is going to buy these assets? And at what price? In this case, one difference is that the government could decide to sell at extreme discounts--banks were unwilling to do that--but such a move might open it to charges that it short-changed taxpayers. Many think the two GSEs ought to be wound down somehow, replaced by something more efficient. We won't know for a while. The Treasury doesn't plan to release a specific plan for Fannie and Freddie until February 2010, when the 2011 budget is due. 

For more:
- here's the article

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