The Treasury Department may have to shell out an additional $73 billion to $215 billion to keep the capital positions of Fannie Mae and Freddie Mac from turning negative, according to loss projections released Thursday by the Federal Housing Finance Agency.
The anticipated losses reflect the government sponsored enterprises' pre-takeover book of business with projections covering writedowns stretching out to 2013. The estimates also take into account dividend payments to the Treasury, which owns the GSEs' preferred stock. To date the agency has pumped $148 billion into Fannie and Freddie. That money has bolstered the GSEs' capital positions but also has filtered back to the government in the form of dividend payments.
The FHFA and the GSEs calculated future losses under three different economic scenarios, including a "deeper" second recession. If the U.S. economy firms up and housing stabilizes, the GSEs may cost the Treasury $221 billion by 2013. But if conditions worsen, the costs will be $363 billion.
In the best-case scenario, Fannie and Freddie will cost the government $142 billion, but that excludes dividends to the Treasury.
