Does your house depend on Fannie, Freddie?

This is a story that isn’t as sexy as the one earlier this week about Jesse Jackson’s plans to begin a new career as a surgeon. But it’s a story that is much more important to most Americans. Particularly those who have a home mortgage or are thinking about ever buying a home.

And regardless of what former U.S. senator Phil Gramm says (“McCain Advisor Refers to Nation of Whiners”) — this country has some big economic problems. Let’s look at jobs. What’s the saying? When your neighbor loses her job it’s a recession. When you lose your job it’s a depression. Well, here’s from an AP/New York Times story printed Friday:

Cautious employers have cut jobs for six consecutive months, bringing total losses to 438,000 so far this year, the government reported last week. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable.

Good luck. Yesterday we saw again just how tough things really are — and how matters may get a lot worse. And of course the oldest trick in the PR play book is to release bad news on Friday. The later the better. Over a holiday weekend best of all. So yesterday, here are two things that happened that all of us should be keeping an eye on. (But won’t be. Because it’s the weekend. Get it!)

First, federal regulators had to step in yesterday and take control of IndyMac Bank, described in the Washington Post as a “struggling mortgage lender.” Aren’t they all struggling?

And folks — this is the second-largest failure ever of a U.S. financial institution. Here’s from the story by Dina ElBoghdady and Renae Merle, “Struggling Mortgage Lender Taken Over by Regulators”:

IndyMac, which staggered this week under a run on deposits, will reopen on Monday under federal control as IndyMac Federal Bank FSB. Insured deposits there are safe. Regulators estimated that the IndyMac failure will cost the federal bank insurance fund between $4 billion and $8 billion.

IndyMac, one of the nation’s largest lenders, got caught in the mortgage meltdown that has led to a global credit crisis. Over the past nine months as borrowers defaulted, it has suffered significant losses and initiated a series of layoffs, including one this week that shrunk its workforce to 3,400 from 7,200.

The Pasadena, Calif., company, which had $32 billion in assets as of March 31, ranks as the largest thrift ever to fail and the second-largest U.S. financial institution ever to collapse, after Continental Illinois National Bank and Trust Co. in 1984.

That should be enough bad news for Friday. Well, not quite.

It appears that the mortgage giants Fannie Mae and Freddie Mac are also caught in the mortgage crisis — with some opining that the government may have to rush in to the rescue. (Note: That sure helped Bear Stearns. Remember?) Although that is being denied right now by Treasury Secretary Henry Paulson and by Fannie and Freddie.

Why does this matter? As reported by Reuters, Fannie and Freddie own or guarantee $5 trillion of debt, close to half of all U.S. mortgages.

Here’s from the Wall Street Journal Online (by subscription) story “Rescue Debate: Paulson Insists Fannie, Freddie Holders Lose“:

As the crisis worsens for mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Henry Paulson is insisting that any potential government rescue plan not benefit the companies’ shareholders, according to people familiar with the matter.

The two stockholder-owned, government-sponsored companies, whose operations are vital to the functioning of the U.S. housing market, faced a severe crisis of confidence after a week in which their stocks each lost nearly half their value. On Friday, Freddie Mac finished the day at $7.75 a share, and Fannie Mae at $10.25.

The discussions at Treasury highlight the dilemma created by the financial crisis gripping the U.S: Some institutions are considered too big to fail, but propping them up could erode the market’s incentive to properly judge risk by offering investors a false sense of security.

After a week of near panic among shareholders of the two companies — and a stomach-churning day on Wall Street Friday — the next big test will come Monday when Freddie Mac is due to sell $3 billion of short-term debt. An unsuccessful sale could be a major blow to investor confidence. If the administration were to intervene, it could do so before markets opened that day, according to a person familiar with the deliberations.

Check out the ending. “The next big test will come Monday…” OK.

Friday both Fannie Mae and Freddie Mac said (again, according to Reuters) that their “finances were sufficiently sound to withstand the housing crisis as government officials scrambled to restore confidence in the country’s two largest mortgage finance companies.”

Let’s hope that wasn’t one of those dump-it-over-the-side-on-Friday PR statements.

“Monday, Monday,” as The Mamas and The Papas might say.

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