The winners, it seems to me, are:
(1) The bondholders, including the foreign governments and investors who own $1.4 trillion in U.S. mortgage debt. I feel like a sucker for investing in treasury bonds rather than Fannie and Freddie bonds. I accepted the lower return because of the lower risk. It turns out the risk wasn’t any lower at all!
(2) People who want to buy, sell, or refinance a house right now. It seems to me that this is a legitimate, but short-term, concern. If Fannie and Freddie failed, the market would eventually readjust to life without them. There would probably be less credit available overall, but then, isn’t the point that too much credit was extended in the go-go years?
The losers are:
(1) The shareholders. If the government purchases new shares (and I understand this to mean a new issue of shares, not purchases on the open market), current shareholders will be diluted. Tough luck.
(2) You guessed it–the taxpayers. The government, after failing to regulate Fannie and Freddie properly, now wants to saddle us with the liabilities that have resulted from their overly sunny and lax practices.
Maybe someone will correctme on this, but I don’t see the same kind of systemic risk in the mortgage market as in the securities market. If a big brokerage fails, it raises the risk that investors will lose their investments for technical reasons having nothing to do with the health of the companies in which they’ve invested. This is because the brokerages are technically the owners of their customers’ securities, and their secured creditors have rights in the securities that may be superior to the rights of the hapless investor. But if Fannie or Freddie fail, it seems to me that the main losers are the people who invested in Fannie or Freddie, which is as it should be, right?