From the Wall Street Journal--Mortgage Crisis Extends Its Reach - WSJ.com: "
The expanding government role isn't the result of initiatives from Washington. As investors have fled from housing exposure, lenders wanting to sell loans they make have had no choice but to rely more on existing agencies that will still buy mortgages, like government-sponsored Fannie Mae and Freddie Mac. To raise funds to lend in the first place, lenders are leaning more heavily on the 12 regional Federal Home Loan Banks, which are cooperatives chartered by Congress but owned by commercial banks and other financial institutions....The political sentiment to expand the companies' powers -- while growing out of the plight of borrowers facing foreclosure -- plays into the hands of the two shareholder-owned companies. Until a few months ago, the debate in Washington centered on whether regulators should be able to force the two, which were both recently involved in accounting scandals, to reduce their holdings of mortgages."Want a nightmare scenario? While an unlikely event, we would really have troubles is one of them (or worse both) got into financial trouble. (Although we would be able to answer the questionof whether the US government would bail out an agency. Given their accounting problems, it is worth considering.