What are the government’s obligations and potential losses from their existing loan guarantees and mortgage-backed securities?
The US government has at least $5.8 trillion of exposure to mortgages and mortgage-backed securities. The government has committed $200 billion to ensure that the GSEs Fannie Mae and Freddie Mac retain positive net worth. (See www.secinfo.com). Fannie and Freddie have a total of about $5 trillion in outstanding debt and mortgage backed securities, which the government would likely decide to guarantee, although it has not yet explicitly done so, if losses exceeded the $200 Billion. Fannie and Freddie bought $60 billion in loans from IndyMac upon its failure. The government explicitly guarantees $428 billion in outstanding mortgages through Ginnie Mae, whose loans originate through the Federal Housing Association, the Department of Veterans Affairs, the Rural Housing Service, and Public and Indian Housing. (See www.ginniemae.gov – Issuers’ pages). The government has agreed to absorb $270 billion in Wachovia’s losses through the FDIC. (See www.fdic.gov – FDIC September 29, 2008 press rele
