Is the furor about Fannie Mae and Freddie Mac overstated? Sure, Fannie’s share price is down 80 percent in a year (Freddie’s even more). But in the same year, Citigroup, Lehman and Merrill Lynch are down almost as much. So Fannie and Freddie have lots of company.

Of course, the big fear is that the “mortgage giants” will fail and the mortgage market will collapse. That fear, I believe, is wildly exaggerated.

First, the mortgage giants are no giants. Together they have about 11,000 employees. Bank of America has that many — plus another 200,000. In market cap, which of course is much lower than before, they total $15 billion. In short, even together they are smaller by most measure than the companies at the bottom of the Fortune 500.

Of course, we are told, Fannie and Freddie guaranty something like $5 trillion in mortgages and their failure could devastate housing markets. That’s a big number. But whenever anyone talks about derivatives, and Fannie and Freddie are in the derivatives business, numbers get big fast. They get meaningless even faster.

If Fannie and Freddie went under, there would still be banks and banks would still write mortgages. The secondary market in mortgages would hiccup badly, but it wouldn’t die.

The proof is the existence of “jumbo” mortgages. Until recently, Fannie and Freddie only packaged “conforming” mortgages. Any loan over $417,000 (the number varied) was out of bounds. Even many smaller loans did not “conform” for one reason or another. To be sure, the interest rate on conforming loans was less — but not a lot less, maybe an eight or a quarter or a point.

So Fannie and Freddie may be the cause of some of that spread, but I doubt they cause all of it. The big fact is that millions of folks have long gotten mortgages without the help of the mortgage giants. Whatever the fate of Fannie and Freddie, the mortgage market will not die.

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