This year’s stress test results for Fannie and Freddie reach the same conclusion as prior tests:  the GSEs won’t crash absent a truly horrific scenario, but any crash will cost the Treasury dearly in the absence of capital cushions. Taxpayers, though, are not at still more risk since these huge draws remain within the scope of Treasury’s current commitment. Recall that the largest U.S. banks passed a similar version of this test earlier this year but only because they now hold huge risk-based and leverage capital reserves.  What’s surprising isn’t that Fannie and Freddie are likely to survive and cost Treasury dearly if they don’t, but rather why Fannie and Freddie fare so differently under comparable scenarios.

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