"But for the average taxpayer - especially those who have little or no interest in the fortunes of Fannie and Freddie - this looks like just another example of government taking a 'too big to fail' approach and forcing everyone to participate in Fannie and Freddie's mistakes," Tjornehoj said.
Consumers are already feeling battered because of falling home values, fewer jobs and rising gas and food prices, said Stuart Hoffman, chief economist of PNC Financial Services Group. On top of that, many are seeing their retirement accounts and pensions deflate with the market in bear territory.
"I think the risk is that companies become more cautious about their hiring, and individuals become even more cautious about their spending," he said. Both outcomes would further dampen economic growth.
Fallout from the government rescue plan will also factor into the rising price of commodities, including oil, said Cameron Findlay, chief economist for online mortgage lender LendingTree.com.
By bailing out Freddie and Fannie, the U.S. government is making its own finances shakier by taking on more debt, potentially contributing to the falling value of the dollar, he said. When the dollar is falling, investors seek the safety of commodities, which has fueled the soaring cost of oil and grains for food.
At the same time, the government's rising debt will make foreign investors more likely to shy away from government-sponsored debt instruments, Findlay said. That will hurt bond prices and contribute to rising interest rates for consumers who want to buy a house, take out a home-equity line of credit or secure other loans.
But several economists said a tug of war of factors - namely a weak economy and inflation - means consumers will continue to see fluctuations in mortgage rates and not much movement on interest rates by the Fed.
The Federal Reserve would be hard-pressed to raise rates and further dampen the economy, while an interest-rate cut by the policymaking body could fuel inflation at a time when oil and gas prices are skyrocketing.
"Mortgage rates have been bouncing up and down between a range," said McBride, the Bankrate.com economist. "That's going to continue until we have a little more visibility on outlook for the economy and inflation."
But some economists said Fannie and Freddie are still likely to tighten underwriting standards and raise mortgage costs, despite the promised federal bailout. Guy Cecala, publisher of Inside Mortgage Finance, said the perception in the financial markets is that the entities don't have a good idea of how their business will be affected by foreclosures and losses.
"They have to deal with the reality of the market that doesn't have any confidence in their ability to manage their losses," Cecala said. "The typical borrower in the country is going to be paying more, and to some extent it's going to be difficult to get any loan at all."
p aul.adams@baltsun.com
l aura.smitherman@baltsun.com
BUSINESS
The Federal Reserve cracks down on some practices of mortgage lenders. Page 1d
