GSE debt is now larger than the publicly held Treasury debt. They are "too large to fail" which means the taxpayers would be on the hook for a multi-trillion dollar bailout.
The value of Fannie's real estate portfolio is distorted by their lending activities. Easy money for homes drives up their value. This is a feedback loop with positive gain. Eventually the system will saturate and the cycle will reverse to destroy wealth much faster than it created it.
That's true in continuously quoted liquid markets like financials, but less likely to be true in real estate.
That said, I wouldn't touch FNM or JPM with the proverbial barge pole.
I know some of this material was included in prior posts. However, can you provide a quick summary of:
Asset $
Liability $
Net Worth $
An essentially plain vanilla business that buys retail mortgages, keeps some and repackages some, is not likely to be at risk for more than 5-10% of assets under the worst of scenarios. If capital is less than 5%-10%, the shortfall only is at risk. That might amount to multi billions, cetainly not multi- trillion.
Also, "too big to fail" usually means "too big AND too well connected to fail" That probably does apply to Fannie because of its GSE nature. Other big entities, however,(e.g. Knickerbocker Trust (1907), Drexel Burnham (1990), Bank of the United States (1932)) are allowed to fail. Some are even pushed.