Fannie Mae and Freddie Mac could require another $190 billion in government support under a worst-case economic scenario, according to stress test results made public yesterday by the firms' federal regulator, the Wall Street Journal reported today. The stress tests, mandated by the Dodd-Frank financial-regulatory overhaul, are designed to forecast potential losses in a "severely adverse" economic environment. The projections released yesterday by the Federal Housing Finance Agency "are not expected outcomes," the regulator said in its report. The stress tests are designed to be similar to those conducted by the Federal Reserve to measure the capital adequacy of large banks and insurance companies. Fannie and Freddie were seized by the U.S. government in 2008 through a legal process known as conservatorship as losses threatened to wipe out thin capital reserves. The Treasury agreed to inject vast sums of aid to keep the companies afloat, and it ultimately provided $188 billion in infusions. The rebound in home prices since 2012 has boosted the fortunes of the companies, which have returned $203 billion to the Treasury in the form of dividend payments.
