How much will a Fannie Mae (FNM) and Freddie Mac (FRE) bailout cost American taxpayers? S&P estimates $1 trillion dollars, or roughly $3,300 per person, says Fortune:
So what might it look like if the government had to lend a hand? Outright nationalization is an unlikely option given that neither the current administration nor the presidential candidates could afford to support such a move in an election year.
More likely, the Treasury Department or the Federal Reserve would come in and provide a liquidity backstop, in the form of a loan or guarantee to bondholders that they will be paid. Fannie and Freddie could even do a preferred stock deal with the government, much like the deal forged by Citigroup with the Abu Dhabi Investment Authority, says Egan.
…The doomsday scenario could cost taxpayers more than $1 trillion, says the S&P report. The report went so far as to say that a government bailout of Fannie or Freddie could force the agency to lower its rating on the creditworthiness of the United States.
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