Don't Count on a Government Takeover Of Fannie/Freddie

7/11 - "Truthfully, the government can't afford to take over Fannie and Freddie because their outstanding debt would more than double the federal government debt outstanding, which would further deteriorate the dollar on international markets. Fannie and Freddie own or guarantee about $5.2 trillion dollars of U.S. home mortgages, or nearly half of those outstanding.

Stock investors are running from the company, but bond investors are not. According to the Wall Street Journal this morning, Bill Gross, chief investment office of PIMCO, bought a large amount of Fannie Mae debt on Thursday. He told the Journal, a default would set off "a firestorm of intolerable proportions."

"Howard Shapiro, a New York based Fox-Pitt analyst told Bloomberg Fannie would need to lose $40 billion immediately and Freddie would need to lose $37 billion to be considered insolvent. For thi...