Some investors are still clinging to the hope that the share prices of Fannie Mae (FNM) and Freddie Mac (FRE) will recover with financial help from the federal government. Both stocks trade below $1 and could still face delisting from the NYSE.

Over the last few days, more news has come out that would indicate the the common shareholders of the two firms will get nothing.

According to The New York Times, Peter J. Wallison, a fellow at the American Enterprise Institute said that that "Fannie Mae’s losses could rise at least $100 billion because of `junk loans’ that are obscured on its books."

Given the breadth and depth of the housing crisis, that number is not entirely shocking. What is amazing is that the federal government, which is pouring tens of billions of dollars into Fannie and Freddie, has not been about to make a clear evaluation of the liabilities attached to the companies.

The trouble with the lack of an evaluation of Fannie Mae and Freddie Mac gets to the heart of one of the greatest flaws of the Fed and Treasury investments and loans to large banks and other financial institutions. The government has not created an analytic agency to go through the books for each company that is receiving federal funds to make an assessment of the balance sheets of the firms with an eye toward a totality of their troubles.

Congress will not get to the bottom of the liability issue. It is not equipped to do it and hearings only scratch the surface.

Without real data on the balance sheets of the country’s largest financial institutions, the bailout is just a roll of the dice.

Douglas A. McIntyre

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