Fannie and Freddie Fallout: What the Experts Say

As shares of  Fannie Mae and Freddie Mac ,continue to drop Friday, concerns are being raised about capital constraints, interest rates and a possible government takeover.

Could a collapse of these mortgage giants may set off more fallout in the housing market and add another kick to the already down dollar?

Here's what experts and commentators are saying on CNBC ...

Capital May Offer Comfort to Debt Investors

"On the debt side, an ongoing concern that is really what the government and regulators are looking at, is really whether or not they can fund the discount notes. [Raising capital] is something that really helps with that and really should give debt investors a lot of comfort."

-Ira Jersey, U.S. interest rate strategist at Credit Suisse

Time to Get Rid of Fan and Fred?

"If you want to get rid of them let's do it in an orderly fashion. I agree with Sean, you start downsizing them and then we can disagree on how far downsized they have to be, getting rid of them being the limit of downsizing."

-Jerry O'Driscoll, of the Cato Institute

Home Owners Can Relax, Share Holders May Not

"All this panic about Freddie Mac and Fannie Mae not being able to meet their obligations is silly. The federal government simply cannot afford to let them fail. They were created by the federal government to make it possible for people to own homes and I think Americans can remain confident that that facility will remain in place."

-Peter Morici University of Maryland School of Business

The Optimistic Outlook

"The key point right now with Fannie and Freddie is at the increment on transactions being done now... Their spread, now this is my guess work because their report hasn't come out yet... the difference between there costed funds and what they make on their investments, I believe, is at modern day record on the upside."

-Dan Fuss, Loomis Sayles vice chairman/portfolio manager

Losses May Spiral Out

"Capital has to go up and rates have to go up over the long term...  but if [Fannie and Freddie] have to pull back substantially [on their lending] the housing market is at risk of another significantly down [move] not only in home purchases but in prices.  And that's a spiraling effect on losses for the U.S., Fannie and Freddie and banks."

- Robert Napoli, Managing director Piper Jeffray

Why The Government Should Bail Them Out

"These companies are giant money makers. The government should put money in them. Three years from now we're all going to come out of this and say, 'Why weren't we in with the government?' The tax payers will make money. This is a bailout you want the government to be in."

-Jim Cramer, Mad Money

The Global Downside to the Bailout

"A bail out of these two institutions could have significant ramifications, further ramifications for deterioration of the dollar. You may even draw in some questions in regard to sovereign debt downgrades.  It's going to cost that much."

-Manus Cranny, MF Global

Advantages to Short Selling

"I think short sellers are going after them, but I don't think in an unreasonable way. I think there are a lot of mortgages they've guaranteed and there's just not that much equity there."

-Manny Weintraub, Intefre Advisors

The Underlying Issues

"I think [a bail out] is a short term fix. Just like Bear Sterns, it gives the market a bit of comfort in the short term. I think in the longer term the underlying problems have to be addressed. The U.S. housing market is still very very weak, foreclosures are at a record high, and prices could head farther south."

- Vasu Menon, OCBC Bank

Dollar in Deeper Trouble

"Initially it is good news that there is going to be government backing and there is going to some form of a bailout but over the larger scenario the fact that these institutions are in such trouble could not be good for the U.S. dollar."

- Simon Grose-Hodge, LGT Bank Liechtenstein

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