Fannie, Freddie Bailout Is Not a Cure-All

Editor's note: Our "On the Brink" series will provide daily insight into the financial firms facing capital shortfalls and the growing pressure from short sellers in the market.

The federal bailout of Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote) set off a rally in financial stocks, but the only meaningful solution to the sector's downturn is something that even a limitless supply of capital simply can't provide: Time.

The initial phase of the mortgage giants' rescue plan, outlined by Treasury Secretary Henry Paulson on Sunday, is intended to bring mortgage rates down and improve pricing for mortgage-backed securities. In theory, it will spur the housing market by making homes more affordable and lift one cloud of uncertainty that has hung over housing debt.

But other factors will continue to drag on the housing market: High unemployment, low wage growth, paltry consumer confidence, and the declining home values that are causing many Americans to abandon their homes and mortgage payments in the first place. ...