Fannie Mae and Freddie Mac Bailout $25 Billion

The Congressional Budget Office on Tuesday estimated Tuesday that a government plan to stabilize mortgage giants Fannie Mae and Freddie Mac could cost government coffers an average of $25 billion.

CBO's estimate is an average based on "the path of housing prices in the next several months." They considered three scenarios: prices stabilize, grow modestly or decline steeply.

The CBO said it thinks there is probably a better than 50% chance that the Treasury would not need to step in. In addition, it said there is nearly a 5% chance that Freddie and Fannie's losses would cost the government $100 billion...

Paulson asked Congress to give the Treasury broad, but temporary powers intended to provide a liquidity and capital "backstop" for the two government-sponsored enterprises (GSEs).

Paulson requested that the Treasury be allowed to offer Fannie and Freddie an unlimited line of credit for 18 months and be given authority to buy stock in the companies if necessary.

Both critics and supporters of the Paulson plan have expressed concern that loaning or investing money in the GSEs could leave taxpayers with a fat bill to pay.

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My thoughts: $100 billion is being too optimistic