Fannie, Freddie Woes Vex Experts and Leave U.S. Hard Choices

Wall Street Journal (08/25/08) P. A2; Reddy, Sudeep
Some of the country's top economists now expect that the Treasury Department will inject funds into Fannie Mae and Freddie Mac, but many are unsure whether that will be enough to bolster the sagging economy. That is because residential prices continue to sink, which has resulted in more homeowner defaults and foreclosures that are having a big impact on banks that hold mortgage-related securities. Meanwhile, the two government-sponsored enterprises face increasing difficulty raising capital from private sources. Treasury action may involve a form of nationalization, which wipes out Fannie Mae and Freddie Mac shareholders entirely.