Guess which financial entities are in line to be the biggest recipients of government handouts as a result of the banking meltdown and foreclosure crisis?
Goldman Sachs? Chase? Morgan Stanley? Try again.
In fact, it now appears that quasi-government agencies Freddie Mac and Fannie Mae will earn that dubious honor.
This week, Freddie Mac announced a narrower loss than anticipated -- a paltry $4.1 billion for the third quarter -- but still asked for another $100 million in federal aid.
That will bring to $133 billion the amount that Fannie and Freddie are in line to receive from taxpayers so far. But it's not the end.
The final tally to get these two entities healthy is estimated at $259 billion, The Associated Press reports, which "would make theirs the costliest bailout" of the financial crisis.
"The fact that losses are better is good. But it's not necessarily a forecast for future earnings growth," said Anthony Sanders, a professor of real estate finance at George Mason University. "The problem still remains that we are faced with a deteriorating housing market."
Fannie and Freddie were created to ensure that banks had a steady stream of capital available for home loans. They buy up loans from lenders, repackage them and sell them to investors. They have their hooks in almost half of all U.S. mortgages -- guaranteed, essentially by U.S. taxpayers.
At the urging of many in Congress who sought to promote homeownership, the two entities encouraged banks to forgo traditional lending practices during the recent housing boom. Most of us can just look around our own neighborhoods to see the wisdom of that approach.
When Democrats passed their much-ballyhooed financial reform bill earlier this year, it didn't touch these two bleeding entities. Now that the GOP has made substantial gains in Congress, we trust they'll be back in the cross-hairs.