Updated to include information about Fannie Mae's first-quarter results, which were reported this morning, and AIG's results, which were reported on Friday.

NEW YORK ( TheStreet) - According to the formula for taxpayer rage -- big bailout + housing + rich executives + lack of humility = angry -- it's puzzling that Fannie Mae ( FNM) and Freddie Mac ( FRE) have largely escaped Average Joe's wrath.

The two firms are emblematic of everything that went wrong with the financial system, and of what seems to be making taxpayers so mad. Fannie and Freddie have been kept alive by the largest taxpayer-financed bailout to date, and now have the luxury of a blank check from the Treasury Department. Their housing-related losses continue unabated, with Fannie Mae saying on Monday that it needed another $8.6 billion in taxpayer support, and Freddie Mac having requested another $10.6 billion last week to keep its balance sheet in tact.
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They're also at the center of the housing crisis. If you own a home, there's a good chance you've interacted with Fannie and Freddie indirectly; they own or insure more than three-quarters of the U.S. housing market. The mortgage-backed securities they create with those loans are repackaged and traded and bet upon by investors. In some sense, they're where the alphabet soup of Wall Street products that have confounded the average citizen -- the RMBS, CDS, CDOs and the like -- all began.

And while executive pay at Fannie and Freddie has become a lot more rational since the firms were taken over by Uncle Sam, their top guns were getting paid quite a bit at the height of the housing frenzy. The CEOs of Fannie and Freddie brought home roughly $60 million combined in 2006 and 2007, just before the punchbowl was yanked away. And even last year, as losses continued to pile up, their top executives received $13.4 million in pay.

Investors, too, have profited on the backs of subprime suffering, via Fannie and Freddie shares. Their returns beat the S&P 500 index by a wide margin, starting in the early 1990s, straight through most of 2007. Short bettors won handsomely as Fannie and Freddie's market caps plunged tens of billions of dollars in 2008, and their penny-stock volatility has given day traders a reason to smile.

So, what gives? Why isn't anyone angry at - or even talking about - the absurdly large liability that Fannie and Freddie represent to the American taxpayer?

"This is a different kind of animal than a Wall Street firm because they're really sort of quasi-government-owned," says Peter Cohan, an expert in financial services who runs a consulting firm. "It has a certain quality that makes it inviolable. No one in Congress can criticize it for whatever reason."

Indeed.

But it's sort of funny because, back in the day, Congress and the White House couldn't get enough of Fannie and Freddie. Lawmakers wanted to have a whole lot to do with the firms because subprime lending earned political capital just as much as bank capital. Homeownership was the American way, and politicians were going to help their constituents achieve that goal, regardless of how much economic sense it made, or what the outcome would be.

As a result, their key regulator -- The Federal Housing Finance Agency -- lifted its goal for Fannie and Freddie's low- and moderate-income mortgage purchases from 30% in 1993 to 56% in 2008. It didn't seem to matter whether those loans were made to qualified buyers, as Fannie and Freddie's recent raft of repurchase demands to big banks has shown.

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The result has brought common sense to light: "Homeownership is not for everybody and there's a real argument to be made for renting," says Eric Donnelly, managing partner of Urban Commercial Mortgage, which originates residential and commercial loans around the country.

While Congress and regulators were putting the screws to the shareholder-owned, government-supported firms, they were facing pressure from the private market as well. Subprime was where Wall Street's smart money was going, and Fannie and Freddie were expected to to ramp up returns by joining the parade.

"Fannie and Freddie were looking like sluggards," says Robert Hockett, an expert in financial law and economics at Cornell Law School. "They weren't moving as fast as these other guys were because they didn't buy these securities. They only bought FHA securities. So, you've got private pressures on them, and at the same time you've got Barney Frank and the Clinton administration putting pressure on them."

Now that Fannie and Freddie are being used as government-operated tools to put a floor under the housing market, mum's the word about their future. The few peeps that have been uttered represent parallel political platforms as well.

It's been nearly two years since Fannie and Freddie were taken over by the Treasury Department. Democrats have indicated that they are taking the responsible route, using the time they need to get a hold of a tremendously difficult situation, and come up with the best plan of action. But try asking Fannie and Freddie's congressional cheerleaders -- particularly Rep. Frank (D., Mass.) and Sen. Chris Dodd (D., Conn.) -- or the man who will have a key hand in their reform, Treasury Secretary Tim Geithner, where that plan is headed. The answers are nearly as vague as the current situation.

At the other end of the dial, a handful of Republican senators have issued statements of anger, frustration and despair at what they characterize as the Obama administration's irresponsibility. A few recently demanded a vote on Fannie and Freddie's future.

But their cries of stupefaction and rage seem to be another political ploy -- this one meant to distract from the debate on financial regulatory reform, and to cast Democrats as wasteful pansies ahead of midterm elections. The cries have largely been ignored by the media and their legislative contemporaries.

When taking a step back to look at the situation in a rational way, the Fannie-Freddie outcome is something taxpayers ought to care about a whole lot more than Lloyd Blankfein's salary.

Blankfein and his firm, Goldman Sachs ( GS), have been the recent bull's eye of taxpayer rage, over a questionable deal structured in 2007. The housing-related transaction appears to have hurt a couple of foolish investors who were betting that subprime would remain strong.

Before Goldman, Bank of America ( BAC) was getting its hide skinned. Then-CEO Ken Lewis was hauled before Congress to answer hostile questions about the crisis-era acquisition of Merrill Lynch. And let's not forget how pissed off everyone was about American International Group's ( AIG) bonuses and salaries, or the time that eight of the country's most powerful bankers had to come before Congress to cry mercy last year.

"I don't think Goldman Sachs should be demonized any more than Fannie and Freddie are," says Hockett. "But I don't think it's caused by inadequate demonization of Fannie and Freddie. It's caused by inappropriate demonization of Goldman Sachs."

To that point, it's worth examining how the big-bank bailouts have actually performed. The six biggest banks -- B of A, JPMorgan Chase ( JPM), Citigroup ( C), Wells Fargo ( WFC), Goldman and Morgan Stanley ( MS) -- borrowed $160 billion in TARP funds. All of them have been returned, at a $9 billion profit to date. The government will earn more from sales of Citi common stock, as well as its auction of warrants to buy Wells Fargo shares.

Though it hasn't repaid any bailout funds and is still 80% taxpayer-owned, even AIG has made significant progress. The insurance giant cut its taxpayer credit lines from $180 billion at the height of its bailout, to under $70 billion today. AIG has also made headway on its derivatives unwind, as well as divestitures of noncore subsidiaries that it will use to start repaying its federal tab. Last week, AIG reported a quarterly profit for shareholders for the first time in over two years.

Fannie and Freddie, though? Their losses continue unabated and their loan books keep sliding further downhill. There's no indication of plans to return the $144.9 billion worth of taxpayer funds they've so far received. In fact, there's a good chance it may never happen.

The top six banks, meanwhile have earned $64.8 billion since the start of 2007, and employ more than 1 million people. Fannie and Freddie lost $237.8 billion over the same period and employ just 11,408 folks.

"They're the multi-trillion dollar problem with multi-billion dollar quarterly losses that nobody's talking about," says Donnelly of Urban Commercial Mortgage. "If anyone paid attention to it, I think it would dwarf what people are talking about on the bank side."

-- Written by Lauren Tara LaCapra in New York.

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