Ready for Bear Stearns, part deux--but with even more government money at stake?

This week has been a wild one on Wall Street, but the scariest stats have come from two government-backed mortgage giants, Freddie Mac and Fannie Mae. The Wall Street Journal's editorial page reports:

As opposed to GM or Ford, most Americans have never heard of Fannie Mae and Freddie Mac. Yet the insolvency of either mortgage giant would have far more profound consequences for every American taxpayer than the bankruptcy of those car companies. It's time Americans understood the price they could soon pay for the Beltway's confidence game with these high-risk "government-sponsored enterprises."

These columns have warned about Fannie and Freddie going back to 2002, and our fate has been to climb a wall of denial and hostility. This week reality began to set in. The duo's share prices tanked nearly 20% on Monday on fears that their capital levels may not be adequate. They rallied on Tuesday as their regulator played cheerleader, but they sank again yesterday to prices in the teens, compared to more than $60 a share last October. Investors are saying that a Bear Stearns-like run on the companies is a real possibility, and they're right.

This is scary stuff, as a collapse would make Americans liable as much as $5 trillion in liabilities--and likely send more shockwaves through the markets.

Ah, well, add it to the tab. The Journal suggests some reforms to save the system, but no one there seems to be holding their breath:

Instead, the political class continues to promote the status quo illusion that Fannie and Freddie are risk-free purveyors of the American housing dream. It is one of the great political scandals of our age, and it has unfolded in broad daylight. As usual, the American taxpayer will get stuck with the bill.