CBO: At Least 50% Chance GSEs Won't Need Treasury Rescue

The Congressional Budget Office estimates there is a greater than 50% chance the Treasury Department will not need to invest in Fannie Mae or Freddie Mac.

Then again, CBO notes that if Treasury needs to prop up the two GSEs it would add up to $25 billion to the federal budget during fiscal years 2009 and 2010. CBO unveiled its estimates in a letter to Rep. John Spratt, D-S.C., chairman of the House Budget Committee.

It notes if Treasury were allowed to invest in GSE securities that would bring about a positive investor response.

As of now the agency needs legislative authority before it can do so, but if it could, that fact alone would spur capital market investors to provide more liquidity to the GSEs and the Federal Home Loan Bank System.

"CBO's estimate reflects the current budgetary treatment and existing scorekeeping conventions for federal credit assistance and equity purchases and does not necessarily measure the underlying change in the federal government's financial condition as a result of this legislation," wrote CBO director Peter Orszag in his letter. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/