The Wall Street bailout continues apace -- now it's just hidden inside Fannie Mae and Freddie Mac.

Fannie and Freddie, some analysts estimate, could lose more than $1 trillion of taxpayer money when all is said and done. That's $1 trillion that, without Fannie and Freddie (and the US taxpayer) would have been lost by banks. Most of it, anyway.*

$1 trillion is more than the cost of the TARP.

How are Fannie and Freddie losing all that money? ($150 billion at last count)

They're foreclosing on homeowners whose mortgages they guaranteed. They're maintaining the houses for a while (US taxpayers are getting a $10 million lawn-mowing bill this summer). And then they are reselling the houses at a huge loss.

And then, in many cases, they're underwriting a new mortgage, for the buyer, generating more fees for the banks. (And you had better hope the house-price crash is over, or two years from now, we'll just be doing it all over again).

Anyway, Fannie and Freddie are having to repossess so many houses that they now own 163,828 of them, says Binyamin Appelbaum in the NYT. That's more houses than there are in Seattle.

And who owns Fannie and Freddie and their foreclosed houses and future losses? YOU do!

So give yourself a pat on the back, taxpayers. You're now one of the biggest landlords in the US!

Read Binyamin Appelbaum's article in the NYT >

*UPDATE: Reader Jeff K. Davis adds the following point: Re: $1 trillion of losses that banks and other financial institutions would absorb if FNM and FRE did not do so (for us)—the banks/financials would have never bought all of the MBS that hold Agency mortgages had it not been for the guarantee. Also, the risk-reward would have been different because without the FNM/FRE guarantee the rate would have been 1/2 to a point higher for a “typical” mortgage with 10-20% a down payment. If you want to look to where the guarantee backfired on financial institutions, consider those who loaded up on FNM and FRE preferred that was lost in the conservatorship. As the financial crisis began to unfold during 2H07, there was a debate as to whether Treasury would stand behind mez capital/senior equity. A number of small banks, some of which have failed (e.g., MBHI) assumed that there was no way the preferred would not be good. Another interesting aspect of the GSE inspired crisis is that their operating debt issued to fund the majority of their balance sheets has tightened notably to Treasuries over the past two years as it is viewed as nearly a UST equivalent, which is what long-time investors always assumed it was. Sadly I might I add.