What I said is that they were adequately capitalized. And they were adequately capitalized according to the law on June 30th.
-James Lockhart, Federal Housing Finance Agency Director (September 8, 2008)

This was not the case according to Morgan Stanley, which was pulled in by Treasury Secretary Hank Paulson to analyze the health of Fannie and Freddie in early August.

After the Fannie and Freddie bailout, many law makers will try to create independent oversight over these large Government Sponsored Enterprises (GSEs). But Morgan Stanley reported that a bailout would cost upwards of $50bn, while William Poole estimated it may be as high as $300bn. Furthermore, the bailout will not turn around falling house prices, which are more the result of a massive price correction and not of the price of mortgages.

Given that the tax payer will ultimately foot this bill--and the liklihood that home prices, which represent a significant portion of Americans' savings--will continue to fall, removing Fannie and Freddie from the fray of politics will be extremely difficult.

Snapshot asks, given the large financial drain of Fannie and Freddie, will the government be able to create a body with independent oversight?

Ashraf Laidi - GSE Bailout Good for Confidence Not for Fundamentals
BNP Paribas - Market Implications of Conservatorship - Initial Thoughts
James Lockhart - Nightly Business Report
Henry M. Paulson - Statement Sept 7, 2008
New York Times - New Agency Proposed to Oversee Freddie Mac and Fannie Mae