Are Fannie and Freddie Going to Go Belly Up, and Will We Bail Them Out

Remembering that the GSEs are, after the US Government, the 2nd and 3rd largest borrowers in the world, one wonders if they are in trouble, if so, how badly, and what happens if things go pear shaped.

Read it, and take your time to absorb the information. It is a primer, but is by no means simple.

The basic rundown is that:

• The GSEs are not insolvent yet
• The taxpayers would have to bail them out if they were
• Unless things get much worse, they will hold onto their AAA ratings.
• Their level 3 (no is sure what they are worth) asset exposure is actually pretty light.
• Their accounting may be a little bit more than one would like.

The question he doesn't answer, and that neither he nor I can answer, is how much worse things will get, and whether the GSEs will need a bailout as a result.

Me, I'm a bear.