Doubts Raised on Big Backers of Mortgages

New York Times (05/06/08) P. A1; Duhigg, Charles
The federal government has depended largely on Fannie Mae and Freddie Mac to bolster the housing market amid the mortgage crisis, but observers increasingly are concerned that the government-sponsored enterprises (GSEs) could soon be in need of help themselves. Their combined capital reserves total $83 billion, but they manage $5 trillion in debt and have posted $9 billion in losses over the past year. Analysts believe the GSEs have yet to account for an additional $19 billion in losses, noting that the housing and credit markets, as well as taxpayers, would be hit hard if either company collapsed. According to Sen. Mel Martinez, R-Fla., "They could cause an economy-wide meltdown if they got into real trouble and leave the public on the hook for billions." Although Fannie Mae and Freddie Mac say their capital reserves surpass required limits by $7 billion, there are threats from top government officials to publicly criticize the GSEs if they do not agree to generate additional capital in the near future. Meanwhile, as experts express concerns about accounting practices that bolstered the GSEs' capital, lawmakers are planning to consider legislation that would increase oversight of the GSEs.