Odds Are G.S.E. Bailout Won't Cost Anything

That's according to the Congressional Budget Office, which has crunched the numbers on Treasury Secretary Henry Paulson's G.S.E. rescue plan. Here are the highlights:

Best Case: There is "probably better than 50 percent" chance that Treasury will not have to use its authority to inject funds into the G.S.E.'s through the end of 2009, when its power to do so would expire. This rosy scenario is most probable if 1) Secretary Paulson's proposal is enacted, providing some comfort to investors 2) the housing situation doesn't get unexpectedly worse.

Worst Case: But with $780 billion in Fannie and Freddie liabilities linked to risky mortgages (supbrime and Alt-A) there is still a significant chance -- five percent -- that the G.S.E.'s will have to be propped up. The C.B.O. forecasts that this could cost $100 billion.

Bottom Line: Taking various scenarios into account, C.B.O. analysts estimate that a bailout would cost $25 billion. If housing market conditions worsen, the real figure would be much larger, and if they improve, the best case scenario will be more likely. The $25 billion figure is also in line with previous estimates and would be much cheaper than the S&L bailout.