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The Urban Land Institute’s excellent blog The Ground Floor has an analysis up considering the implications of the Fannie/Freddie bailout.

We’re not in Kansas anymore, Dorothy. In fact, we are not anywhere we have ever been before, and are plowing new, uncharted waters. Seventy years ago the federal government, in the middle of the Depression and a housing crisis, nationalized the mortgage markets by, among other things, creating Fannie Mae as a government entity. Over the following decdades there has been a gradual privatizing of the fed’s role in the mortgage markets. Now, in the middle of the worst housing crisis since the Depression, the markets have been nationalized again.

Did they have to do this? Yes, though you could argue over the timing and the method used. But the current housing market crash, the continued illiquidity of mortgage backed securities (MBS) and all the financial instruments built on top of them, and the growing distrust (especially in foreign markets) in the ability of Fannie and Freddie to withstand continued losses, meant that the federal government would have to use its newly created powers to back them sooner or later and in one way or another.

Could Fannie Mae and Freddie Mac have survived as independent entities, given enough time and the confidence of the markets? We’ll never know the answer to this, of course, but unless the housing markets found their bottom this year or early next year, the probability is that the losses the two companies were suffering would have tripped capital provisions that they could not have met. In other words, it looks like the current housing collapse is so unprecedented that it was blowing through the stress models the companies used to determine how much capital they needed.