The US on Tuesday began to face the financial consequences of the bail-out of Fannie Mae and Freddie Mac after Congress’s budget watchdog said the housing giants’ operations should sit on the government’s books and the cost of insuring against a US default crept higher. With the stock market tumbling, the non-partisan Congressional Budget Office said the government takeover of Fannie and Freddie meant the companies should no longer be regarded as outside the public sector. Peter Orszag, CBO director, said: ‘It is the CBO view that Fannie Mae and Freddie Mac should be directly incorporated into the federal budget.’ The Bush administration appeared to be caught by surprise. A spokeswoman for the Office of Management and Budget told the Financial Times: ‘We are working through this issue with Treasury and other stakeholders.’ The White House could take a different view on Fannie and Freddie and exclude them from its budgets. But this would be difficult because the CBO is regarded as the leading independent authority on US finances and its assessments guide spending decisions by Congress. The two mortgage companies have between them $5,400bn in liabilities, equal to the entire publicly traded debt of […]