Fannie Mae and Freddie Mac were early victims of the financial crisis. Amid growing losses in the companies' home-loan portfolios, the giant mortgage guarantors were taken over by the government in early September 2008. Both companies' CEOs got the boot. At the time, the government said it was going to dramatically shrink the two companies in the next few years, though officials didn't say how, and skeptics wondered if this was even possible.
A year later, the roles of Fannie and Freddie in the mortgage market have expanded, not shrunk, as have their losses. The two companies now back about 70% of all home loans, up from just one-third three years ago. The Fannie and Freddie bailouts have already cost the government nearly $100 billion, and analysts say the eventual cost may be as much as double that. How long the government will hold on to the companies and how it plans to get rid of them are still up in the air. Most agree the two companies should no longer be able to invest in subprime mortgages. The Obama Administration has said it is beginning to look at a solution for Fannie and Freddie, but most don't expect official plans until early next year.