Friday, July 25, 2008

So How Bad is the Damage?

The demise of Indymac is expected to cost the FDIC around $8 billion of its meager $53 billion of reserves.

Four or five bank failures of equal size and the FDIC will be underwater, which is a serious problem since even conservative estimates expect bank failures to run into the hundreds.

But Indymac is small potatoes compared to the liabilities of the two mortgage behemoths, Fannie Mae and Freddie Mac. As the housing bubble continues to fizzle; Fannie and Freddie could face losses of $500 billion or more.

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