Fannie and Freddie Pose Risk to US Economy

By:: MortgageLoan.com | April 16, 2008

An S&P report, published on Monday, further exasperated the plight of stricken homeowners by estimating the potential bill to U.S taxpayers to bail out Wall Street firms hit by the credit crisis could grow to as much as $400 billion. With Fannie Mae (FNM) and Freddie Mac (FRE) added to the equation, any rescue package could pose significant economic risks to the United States.

The ratings agency said the two government backed enterprises could cause the U.S to lose its sterling triple-A rating if the government were forced to come to their rescue.

"Even though...credit damage from GSEs is unlikely, the greater risk to the U.S lies with them than with broker dealers," S&P highlighted.

Still, S&P analysts see a bailout of Fannie and Freddie as unlikely and point out that U.S officials "are focused on avoiding a deep and prolonged recession."

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