Investors, invest in Fanny and Freddie and make interest off their investments, paid by your mortgage payments and interest paid on your loans. Money from investors is used to buy up the "notes" for homes sold by others.

If Fanny and Freddie go bankrupt, due to buying too many "shaddie" loans, or loans from buyers who defaulted, then you’d still owe your debt, but to whomever bought the bankrupted companies.

In this case, since the federal govt hold the "contract", guaranteed the Feddie and Fanny securities, it’s Uncle Sam who will become the owner, since the chief executives and board that was in control, mismanged their trust.
They did not properly supervise, or monitor the mortgage companies, from which they bought mortgage securities.

The tax-payers will be responsible for paying investors, or making up losses and keeping Freddie and Fanny afloat.

If not, smaller mortgage lenders and banks could not keep making loans.
Without Freddie or Fannie’s "sucking up" of loans, and paying back the bankers and mortgage lenders, then the small guy looking to buy a home, would either not be able to get a loan, or would pay extra high interest rates to guarantee more "risky" loans.

Had the Bush administration in past 8 years, and the Department of Commerce paid more attention, had the economy been better, and unemployment rates hadn’t risen to now about 6 percent, this crisis would not have happened.

Poor government, government that doesn’t believe in enforcing sound regulations, leads to greater problems for both business and the consumer. Like lead in children’s toys from China, another example of mis-management, among others.
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