The Next Six Bailouts?

Was the government's $3.8 billion infusion of cash into GMAC last week a sign of what's to come in this new year?

Some experts expect to see billions more in bailouts in 2010 -- this despite the fact that all nine original recipients of the government's Troubled Asset Relief Program (TARP) have repaid the tens of billions in loans they received in 2008 and 2009.

"I think that some of the weak links are going to need more money," said Joel L. Naroff, president and founder of Naroff Economic Advisors. "It's always impossible to say there won't be another major calamity, especially given that we're still facing massive foreclosures."

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So who are the weak links? Naroff and others have a few ideas.

Fannie Mae and Freddie Mac: Taxpayers already have spent $111 billion to bail out government-sponsored mortgage giants Fannie Mae and Freddie Mac, but as foreclosures continue to ravage the housing market, some suspect taxpayers soon will be on the hook for billions more in Fannie and Freddie support.

Late last month, the Treasury Department strengthened those suspicions when it announced that it would remove a $400 billion cap on Fannie and Freddie aid.

Thanks to high unemployment, the two companies will continue to see their portfolios weighed down by mortgage defaults, Naroff said.

"Ten percent unemployment means more foreclosures and more problems in paying back mortgages, and we're talking about kinds of mortgages that Fannie and Freddie thought were good mortgages," he said.

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As it did before, the government, he said, will step in to help stop the bleeding either by direct infusions of cash or other rescue measures.

"They're not going to let Fannie and Freddie go," he said.

More Mortgage Woes

Federal Housing Administration: Fannie and Freddie would be in even worse shape if it wasn't for the Federal Housing Administration, said Daryl Montgomery, a trader and the organizer of the investing group, New York Investing Meetup.

In a blog post on the financial Web site, Montgomery writes that many of the loans that would have once been handled by Fannie and Freddie are now being insured by FHA, which has seen the number of mortgages it insures surge since the financial crisis hit.

"The FHA is now backing loans that would have made a crooked subprime mortgage broker blush in the heyday of the housing bubble," he wrote. "If somehow the FHA manages to get through 2010 without a bailout, it will wind up being bailed out in the first half of 2011 instead."

An audit last fall found that FHA's reserve fund was below federally-mandated limits, but the agency at the time pledged that it would not require taxpayer assistance and unveiled new measures designed to manage the agency's risks.

"To be clear, the fund's reserves are sufficient to cover our future losses, so the FHA will not require taxpayer assistance or new Congressional action," FHA Commissioner David H. Stevens said in a written statement last September. "That said, given the size and scope of the FHA and its importance to today's market, these risk management and credit policy changes are important steps in strengthening the FHA fund by ensuring that lenders have proper and sufficient protections."

AIG: The government has committed $180 billion in taxpayer aid to the crippled insurance behemoth since 2008. Is it in line for more?

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