Odds Are GSE Bailout Won't Cost Anything

That's according to the Congressional Budget Office, which has crunched the numbers on Treasury Secretary Henry Paulson's G.S.E. rescue plan. Here are the highlights:

Best Case: There is "probably better than 50 percent" chance that Treasury will not have to use its authority to inject funds into the G.S.E.'s through the end of 2009, when its power to do so would expire. This rosy scenario is most probable if 1) Secretary Paulson's proposal is enacted, providing some comfort to investors 2) the housing situation doesn't get unexpectedly worse.

Worst Case: But with $780 billion in Fannie (FNM) and Freddie (FRE) liabilities linked to risky mortgages (supbrime and Alt-A) there is still a significant chance -- five percent -- that the G.S.E.'s will have to be propped up. The C.B.O. forecasts that this could cost $100 billion.

Bottom Line: Taking various scenarios into account, C.B.O. analysts estimate that a bailout would cost $25 billion. If housing market conditions worsen, the real figure would be much larger, and if they improve, the best case scenario will be more likely. The $25 billion figure is also in line with previous estimates and would be much cheaper than the S&L bailout.

Comments

[Britishsteel:]

the question is : can a market be truly free when its nationalized? How can someone not look at it as a casino now more than ever ? its not ok to naked short sell the 19 banks on the list given by the SEC but its ok to naked short any other stocks even though naked short selling is Illegal? oh and by the way Market makers can still naked short they are exempted? Is the average american that stupid? YES! Welcome to the wonderful world of socialism. My advice rent the stocks long or short for a few minutes or hours but do not hold overnite or invest ! DO NOT INVEST! Thats what they want , to pass on what they bought to americans just like the S & L crisis and now the subprime problems that blew up on them and the soon to be helocs and credit card defaults.

2008 Jul 23 08:41 AM

[g7enn:]

One would think people would wise up by now, regarding the real cost of various government projects. They manipulate taxpayers into putting up money by quoting a low cost or just the cost of the first few months or year. S&P resports the bailout could cost more than $1.0 Trillion!
www.clusterstock.com/2...-

Here's an expert with experience on the subject. Listen to this video and wake up:
www.bloomberg.com/avp/...

2008 Jul 23 10:12 AM