What's Up with Fannie Mae?

I was listening to Bob Brinker's talk radio show on the way to a weekend appointment, when he rattled investors by mentioning that Rep. Barney Frank had said that debt issued by Fannie Mae and Freddie Mac is different from bonds issued by the Treasury Department. Frank also raised the possible risk that investors in the companies' debt may not be paid back.
To calm worried investors, Frank later issued a statement adding that "this status does not prevent the Treasury from treating the debt of Fannie and Freddie in the manner that it believes best supports the important goal of stabilizing the financial system."
Treasury Department was forced Friday to reiterate its financial support for Fannie Mae and Freddie Mac. "As we said in December, there should be no uncertainty about Treasury's commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market," Treasury spokeswoman Meg Reilly said in a statement.
While their debt doesn't carry an explicit government guarantee, the Treasury has taken numerous steps to reassure investors that the government will keep the companies running. Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie. So far, the companies have needed $126 billion in taxpayer aid.
Frank's statement unsettled investors because it injected a measure of uncertainty into the market. He has scheduled a hearing for later this month on the two companies' future. The Obama administration, however, wants to wait until 2011 to propose an overhaul.
Fannie Mae admitted last week that it needs another $15.3 billion from the federal government to stabilize its finances. Fannie, which is controlled by the federal government, has been making some financial progress. It reported a fourth-quarter loss of $16.3 billion, including $1.2 billion in dividend payments to the Treasury Department, as compared to a loss of $25.2 billion in the same period in 2008.
(I guess that this is improvement.)
Its problems stem from a continuing stream of bad loans, with over 5 percent of its single-family loans more than 90 days delinquent, up from 2.42 percent in 2009.