As Fannie Mae and Freddie Mac celebrate their seven-year anniversary of conservatorship, new legislation is being drafted in the U.S. House of Representatives that will allow them to establish more capital and prevent another taxpayer-sponsored bailout.
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GSEs Would Need Up To $157 Billion Bailout in Economic Downturn
The Dodd-Frank Act Stress Tests (DFAST) – Severely Adverse Scenario report indicated that the two GSEs would need a second taxpayer bailout, this time of up to $157.3 billion, under hypothetical adverse economic conditions that included a rise in the nation's unemployment level up to 10 percent by the middle of 2016; a decline in real GDP as large as 4.5 percent by the end of 2015 before recovery begins in 2016; and long term interest rates drop significantly while short-term rates remain near zero.
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