Saving the GSEs

Well, as we predicted yesterday the Congressional Budget Office gave cover to politicians to vote in favor of the GSE bail out. Obviously no time was wasted - with the headlines blaring that U.S. House Approves Fannie-Freddie Bill by 272-152. Lets take a look at what Bloomberg describes -

The U.S. House of Representatives approved legislation designed to shore up confidence in Fannie Mae and Freddie Mac and stem the record surge in mortgage foreclosures, sending the bill to the Senate.

House members voted 272-152 in favor of the measure, which lawmakers and administration officials expect will be passed in the Senate and signed into law by President George W. Bush. The bill gives Treasury Secretary Henry Paulson power to inject capital into Fannie Mae and Freddie Mac and provides for a federal agency to insure refinanced home loans.

Paulson overcame opposition within his own party after some Republicans said the bill risked taxpayer funds and fell short on overhauling the mortgage-finance firms. The Treasury chief said the measure was critical to U.S. financial-market stability and persuaded Bush to drop a veto threat.

...
The Treasury secretary would get power to make unlimited equity purchases in and lend to Fannie Mae and Freddie Mac to prevent a collapse in the firms that account for 70 percent of new U.S. mortgages. The bill also provides for a federal agency to insure as much as $300 billion of refinanced mortgages for struggling homeowners

So we basically just gave unlimited authority to prop up Fannie Mae and Freddie Mac. But hopefully it is around the $25 billion projected by the CBO. Add the $300 billion to help refinance mortgages that is also in the bill. This could easily add up to one expensive bill.