A year ago federal officials looked at Fannie Mae and Freddie Mac and declared that all was well. The two government-sponsored enterprises (GSEs) largely held dull and boring conventional loans, though they were about to acquire subprime mortgages.

"Although their $40 billion-plus planned commitment to subprime over the next several years is small compared to the $1.5 trillion subprime market and well less than 1 percent of their combined book of business, it does represent over half their combined GAAP capital," said Office of Federal Housing Enterprise Oversight, government agency that oversees the two giant companies.

A year later Fannie Mae and Freddie Mac have bulked up their capital requirements, they have minimal subprime exposure and yet rumors on Wall Street caused a near panic last week.

Let's try some numbers. Imagine that 15 percent of the $40 billion in subprime loans default. That's financing worth $6 billion -- a lot of money to you and me but not much to Fannie Mae and Freddie Mac. Why?

First, Fannie Mae and Freddie Mac "have large liquidity portfolios, access to the debt market and over $1.5 trillion in unpledged assets," according to OFHEO.

Second, Fannie Mae raised $7.4 billion in May, Freddie Mac is raising another $5.5 billion. This is on top of the billions of dollars they already hold plus a huge ability to borrow.

Third, foreclosures represent losses -- but not 100-percent losses. All the $6 billion would not evaporate.

In the past few years Fannie Mae and Freddie Mac have had major accounting issues and have stumbled both financially and in terms of institutional leadership. But despite massive problems they functioned without interruption, and they functioned well. If this were not the case we would have anything but the low mortgage rates seen in recent months.

Prudence dictates that Fannie Mae and Freddie Mac require careful scrutiny, both with the mortgages they hold and the securities they create. But to date there has been nothing to justify the Wall Street frenzy seen during the past few days.

By late last week malicious gossip regarding Fannie Mae and Freddie Mac appeared to wane, but what continues in place is a need to better understand who or what put such rumors in play -- and who benefitted.