Fannie Mae and Freddie Mac have both shown dramatic losses.  Combined they control $5 Trillion dollars of the US mortgage market.  In comparison the US deficit is 9.5 Trillion.  Now keep in mind that it would be impossible for all 5 Trillion dollars worth of loans to go bad at the same time.   However, when you consider that this week Fannie Mae showed a 2.3 Billion dollar loss which is a large impact on their cash reserves it give you a better picture of what is going on.  Fannie Mae and Freddie Mac where both given more lenient cash reserve requirements as a part of the recent changes that Congress and the President gave both companies in an effort to help control the Sub-Prime mess.  This reduction in the cash reserves is a formula for disaster.  Imagine Bears and Sterns just prior to the Fed take over.  You have a company who could not withstand any demands on its liquidity and yet you allow them to lower their cash requirements?  If you want another example then look at what just happened to IndyMac. 

Paulson got a blank check from Congress and instead of investing it he literally told Fannie and Freddie to go spend.  He will feel the repercussions of this action in the near future when the next wave of foreclosure makes the impact during 2009 and 2010.  He will need to pull out that check book and empty the bank account and then turn to the Tax Payer again for more money.  When all said and done I think that the true mess of the current bank crisis will cost around 500 Billion.