Economists Bet on Aid for Fannie and Freddie

Wall Street Journal (08/15/08) P. A3; Izzo, Phil
A majority of economists taking part in a new Wall Street Journal forecasting survey believe U.S. government money will eventually be used to bail out Fannie Mae and Freddie Mac, while nearly 33 percent said the two government-sponsored enterprises should be nationalized. Losses posted by the two GSEs earlier this month coupled with continued concerns about the credit market have increased the likelihood that government funds will be needed. On average, the 53 economists surveyed in the poll put the probability at 59 percent that the Treasury Department will step in to prop up Fannie Mae and/or Freddie Mac. When asked how the government should handle the situation, though, 68 percent said the lenders should be pressed to raise capital privately and hope a slowly rebounding housing market will keep them from needing government money.