04/11/2010 05:12 am ET Updated May 25, 2011

Fannie, Freddie: Still 'No Exit' For Government's Investments In Troubled Housing Giants

Seventeen months and $110 billion later, the U.S. government's enormous investment in Fannie Mae and Freddie Mac has turned the two firms into semi-permanent crutches for the ailing housing market.

As this morning's deep dive into Fannie and Freddie in the Wall Street Journal puts it, two companies are still "troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government." Just last week, James B. Lockhart III, the former head of the Federal Housing Finance Agency, Fannie and Freddie's regulator, suggested that the government's investment would essentially be permanent:

Here's Lockhart:

"I would love to figure out how to get there, but I think we may be too far along the line of government involvement...Most of that money will never be seen again. They were just allowed to leverage themselves so dramatically."

The WSJ identifies two ways in which Fannie and Freddie are helping to prop up home prices. First, because Fannie and Freddie provide46 percent of the outstanding mortgage debt in the U.S., they are seen as "essential cogs in the housing market." Second, the WSJ argues that they are being used as tools of public policy, a sentiment shared by House Financial Services Chairman Barney Frank (D-Mass.) and even ousted Fannie Mae CEO Daniel Mudd.

For their part, Fannie and Freddie executives have taken to openly suggesting their companies are being forced to attend to more than bottom-line concerns. Here's the WSJ:

"We're making decisions on [loan modifications] and other issues, without being guided solely by profitability, that no purely private bank ever could," Mr. Haldeman said in late January in a speech to the Detroit Economic Club.

The Congressional Budget Office has estimated the U.S. government will lose $291 billion on its investments in Fannie and Freddie this year alone. The two firms are expected to cost taxpayers an additional $99 billion in the coming decade, for a grand total loss of $390 billion.

Frank (D-Mass.) recently called for the two firms to be abolished. "The remedy here is to, in fact, as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Frank. "That's the approach, rather than a piecemeal one."

For now, no Fannie and Freddie fix seems imminent. The Obama administration, the WSJ noted, included just one line in its 2010 budget regarding the two companies, saying it would "monitor the situation" and "provide updates."

Read the entire WSJ piece here.