After conducting stress tests of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency projects that the two government-backed mortgage providers may need as much as $363 billion from the Treasury Department through 2013. According to the FHFA, that's a worst-case-scenario that will depend heavily on the recovery of the housing market. “These projections are intended to give policy makers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac,” said Edward DeMarco, acting director of the FHFA. “The results reflect the potential effects of a limited set of hypothetical changes in house prices.” How did Fannie and Freddie become such a taxpayer liability?

  • It All Started in 2008, writes Lorraine Woellert at Bloomberg: "Regulators took control of Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, in September 2008 after losses stemming from the subprime mortgage crisis pushed them to the brink of collapse. Since then, the two companies have used U.S. aid to buy and guarantee home loans while Washington policy makers weigh an overhaul of the mortgage-finance system."

  • Fannie and Freddie Bore the Brunt of the Collapse, writes Patrice Hill at The Washington Times: "As the ultimate guarantors of trillions of dollars of risky mortgages that went bad during the housing market's collapse, Fannie and Freddie were saddled with a disproportionate share of burgeoning mortgage losses. Nearly four years into the housing crisis, no end is in sight to the red ink, with the pace of foreclosures only picking up speed this year."

  • The Outlook Looks Like This, explains Rachael Granby at Seeking Alpha

In that worst-case scenario, the cost to taxpayers would be $259B, because almost 30% of the funds would come back to the Treasury in the form of dividend payments. A best-case scenario would see the two mortgage giants take a total of $221B, costing taxpayers $142B after dividends. So far, Fannie and Freddie have drawn $148B, which means that even if the economy sees a strong near-term recovery, regulators expect to pay out at least another $70B.

  • Fannie and Freddie Are the Weakest Link, writes Zachary Goldfarb at The Washington Post: "It is becoming increasingly clear that the rescue of Fannie and Freddie will be the most expensive part of the government's response to the financial crisis. While many banks and even American International Group have repaid or are working to reimburse the government, the likelihood of Fannie and Freddie doing so is slim, their regulator said."

  • Could Be Even Bleaker, notes Lorraine Woellert at Bloomberg: "Sean Egan, president of Egan- Jones Ratings Co. in Haverford, Pennsylvania, said a 20 percent loss on the companies’ loans and guarantees could lead to a $1 trillion taxpayer bailout."

  • Here's Where Republicans and the White House Disagree, writes Nick Timiraos at The Wall Street Journal:

Some Republicans argue the government should focus on shrinking the firms and ultimately privatizing them. The Obama administration, which has promised to outline its proposed overhaul of the broader housing-finance system by next January, has said a government role may still be needed to preserve the long-term, fixed-rate mortgages that have become the keystone of the American mortgage market.

  • 'The Moral of the Story Here Is Pretty Clear,' writes Dan Indiviglio at The Atlantic: "Quasi-public enterprises like Fannie and Freddie don't work. The risk they take on can grow much too great, because unlike private companies, they don't need market discipline and suffer from moral hazard. Banks may have taken on a lot of risk as well, but they were able to endure it once the panic subsided."