The problem with Fannie and Freddie is that depending on how you count the beans, their liabilities are worth more than their assets. Using so-called fair value accounting -- which marks their assets and liabilities to immediate market value -- Fannie is worth $12.5 billion (a sliver of equity supporting $2.8 trillion in assets) and Freddie has a negative net worth of $5.6 billion. Others calculate that both have a negative net worth of $50 billion. The Bush administration wants to gut these GSEs (they're Democratic strongholds). How will the GSEs perish? Barron's reports that if Fannie and Freddie fail to raise at least $10 billion in fresh capital, the administration is "likely to mount its own recapitalization, with Treasury infusing taxpayer money into the enterprises. The infusion would take the form of a preferred stock with such seniority, dividend preference and convertibility rights that Fannie's and Freddie's existing common shares effectively would be wiped out, and their preferred shares left bereft of dividends." But wait, there's more. The White House also wants to exact vengeance on Fannie and Freddie's management. It will replace management, limit their investments, and sell their assets before reselling them to the public or merging them with other GSEs. In particular, Barron's writes that "Treasury would install new management and directors at both, curb the GSEs' sometimes reckless investment and guarantee operations, and liquidate in an orderly fashion the GSEs' troubled $1.6 billion in on-balance-sheet investments. Then the companies could be resold to the public without their explicit government debt guarantees, or folded into government agencies like Ginnie Mae or the FHA." Whatever amount of taxpayer money is used to bail out Fannie and Freddie, I hope that the government uses the $38 million earned by taxpayers such as Richard Syron, Freddie's CEO, and the other executives and directors of Fannie and Freddie, before it uses my taxes. Then they can go after the pay of those government regulators who were supposed to be supervising them. They should pay the first price for their mistakes.