WASHINGTON -- Providing additional capital to mortgage buyers Fannie Mae and Freddie Mac could cost the federal government $25 billion over the next two fiscal years, according to analysis by the Congressional Budget Office released today.
But the CBO said if Congress gave the Treasury Department the authority to buy shares of the two government sponsored enterprises "private markets might be sufficiently reassured to provide the GSEs with adequate capital to continue operations without any infusion of funds from the treasury."
The CBO said there is "probably a better than 50%" chance that the Treasury Department won't have to use its authority before it expires in December 2009.
Treasury Secretary Henry Paulson requested the additional authority last week, in the wake of recently reported losses of Fannie and Freddie. Congressional leaders have said the additional authority will be included in the housing bill that the House is scheduled to consider tomorrow.
Fannie and Freddie, which have lost more than $11 billion in the nine months ending March 31, own or guarantee $5.2 trillion worth of home mortgages, about half of all outstanding loans.