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Freddie, Fannie Rescue Could Cost $25 Billion

A federal rescue of troubled mortgage giants Fannie Mae and Freddie Mac could cost taxpayers as much as $25 billion, the Congressional Budget Office said Tuesday.

But CBO Director Peter R. Orszag said in a letter to lawmakers that there is a better than 50 percent chance that the government will not have to step in to prop up the companies by lending them money or buying stock.

Congress is expected to vote this week on a housing measure that includes Treasury Department authority to throw Fannie and Freddie a temporary lifeline.

Treasury Secretary Henry M. Paulson, who has been pressing for the power, says the backup plan will help to calm investors and stabilize financial markets.

Orszag said it's most likely that the companies will remain afloat and the government won't have to put up any money, but there's a very small possibility that Treasury will have to step in to help cover losses at Fannie and Freddie topping $100 billion. The $25 billion estimate reflects his office's best guess of how big a federal infusion would be needed.

The Associated Press contributed to this report.

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