There is much in the legislation to like as well as to dislike. The bill guaranteed up to $300 billion in low-cost mortgages and provides roughly $15 billion in tax breaks. 

The history of Fannie and Freddie has allowed them to exist as corporate hybrids—private entities when the bottom line realizes a profit, public when it falls in the red—translation: shareholders reap the profits; taxpayers guarantee the loans.

The bill also set up a new federal regulation arm, allegedly with teeth, to oversee Fannie and Freddie. The conventional wisdom held that Fannie and Freddie were too big to fail. The tenuous financial positions of Fannie and Freddie hold enormous global ramifications that unmercifully tied Congress’ hands.  

Without investor confidence, Russia alone has the potential to dump $100 billion of Fannie and Freddie debt into the market, which could lead to a global collapse—another reason any domestic pundit or politician offering a definitive plan toward ending the Russia/Georgia conflict is guilty of hyperbole run amok.

Will the backing of the U.S. government be enough to assist the mortgage giants in sorting out their financial tribulations? Or will they require billions in loans or stock purchases? That seems to be the economic crossroads that we’ve arrived that is best defined by a single word: hope.  The best-case scenario between the elected officials and federal agencies that supported the bailout and the economist that analyzed it hangs on the slender thread of hope.

According to a recent Wall Street Journal poll, 59perent of economist believe the Treasury Department will have step in with a financial rescue, but a majority hoped it does not come to that, and 33 percent opted for nationalization.  

But when has the promise of a government-backed blank check not been the preferred option of the designated recipient?

Given the possible financial ramifications it seems incomprehensible that South Carolina’s Republican Senator Jim DeMint’s proposal to put an end to the lobbying arm of Fannie and Freddie would be struck down during the bailout debate.

“If American taxpayers are forced to buyout Fannie Mae and Freddie Mac, their lobbying and political activities should stop,” said DeMint.

“If we plan to use taxpayer dollars to buy shares of these troubled companies, they should be treated like other federal entities,” he said.

DeMint’s comments are on the mark, there is nothing in the bill that fundamentally changes the way Fannie and Freddie conducts business.  According to the online magazine, Politico, Fannie and Freddie have done an extraordinary job in utilizing their political muscle in the most bipartisan manner.

Over the past decade they’ve combined to spend more than $200 billion on lobbying and campaign contributions. Moreover, John McCain’s campaign manager Rick Davis and former vice president vetter for Back Obama, Jim Johnson were once lobbyist for the two mortgage behemoths. At least 20 of McCain’s fundraisers lobbied for Freddie and Fannie. 

According to the Center for Responsive Politics, Fannie and Freddie rank as the #1 and #3 top contributors in the mortgage industry and rank in the Top 100 political donors of all time. Fannie and Freddie are also scheduled to host events at this year’s Republican and Democratic conventions.

There is nothing in the bill that prohibits Fannie and Freddie from spending an additional $3.5 million on lobbying as they did in the first three months of this year or hire 42 outside lobbying firms.  For all of the discussion centered on economics and the tightening of regulation on Fannie and Freddie, the bailout was a bill ultimately driven by the politics.

And the politics of this bill changes nothing. Fannie and Freddie can continue to throw its political muscle around, those who voted for the American Housing Rescue and Foreclosure Prevention Act hope things will work out, and there remains a government backed blank check signed by the American taxpayer, just in case Fannie and Freddie could use a little something to hold them over if things get rough. .