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Fannie Mae and Freddie Mac, government-sponsored enterprises, were meant to help Americans buy homes. Now, these two corporations are making politically appointed executives rich while amassing debt that could cost taxpayers billions.

As adolescents, Americans begin dreaming of owning their own homes. Backyard swimming pools and customized bowling alleys seem like great ideas to many, until they grow up and realize how much money such amenities cost. Chances are that Suzie and Johnnie don't have enough cash to fund even a small fixer-upper, so they go to their local bank and inquire about a loan.

But where do the banks get all the money they provide for the many thousands of prospective homeowners? Enter Fannie Mae and Freddie Mac. No, they aren't Johnnie's childhood friends who struck it rich. Fannie Mae is the Federal National Mortgage Association and Freddie Mac is the Federal Home Loan Mortgage Corp. -- a pair of government-sponsored enterprises, or GSEs, created by Congress to provide liquidity in the secondary-mortgage market with the mission of ensuring that Americans have affordable housing.

And they have struck it rich. From modest beginnings these ventures have become two of the most profitable enterprises in the world, with earnings last year in the billions of dollars. Money like that gets attention.

Not only have the GSEs made huge profits of late, they also have racked up massive amounts of debt. To be exact, $1.89 trillion last year.

As politicians promise to pay down the national debt, critics have expressed concern about this burgeoning GSE debt and the fact that soon Fannie Mae and Freddie Mac will have assumed the risk for more than half of all U.S. home mortgages. A downturn in the economy could result in a huge bailout bill for U.S. tax-payers, critics say, much like the savings-and-loan crisis a decade ago that cost taxpayers $500 billion.

As the economy soars like a balloon, voices in Congress and among government-watchdog groups are calling for stricter oversight and a potential overhaul of these wealthy quasi-public corporations. They note that what should be a business is so political that the president appoints five members to Fannie Mae and Freddie Mac's boards. In fact, Fannie Mae Chief Executive Officer Franklin Raines has been touted as a possible running mate for Al Gore.

Raines was director of President Clinton's Office of Management and Budget, or OMB. In his first year at Fannie Mae he was paid more than $4 million and had almost $6 million in unexercised stock options. It was a nice raise from the $130,000 he received as director of OMB. Other top brass also received astoundingly high remuneration.

While such pay may be peanuts compared with the net worth of Microsoft Chairman Bill Gates, Gates earned his money without government benefits and guarantees. "GSEs are stealth recipients of corporate welfare" consumer advocate Ralph Nader told Congress last summer. "Much of the risk of these housing-finance enterprises remains with the federal government while the profits flow to shareholders" including the political appointees.

Is some loyal politico in need of big money? Well, Fannie Mae and Freddie Mac are generous political sinecures. Outgoing Fannie Mae chief James Johnson was Walter Mondale's campaign chairman and received $12 million in cash as he exited, not to mention stock options. Jamie Gorelick was Attorney General Janet Reno's No. 2 at Justice and received at least $2 million in cash, again not including stock options, to grease things for Fannie Mae on Capitol Hill.

Board members of Fannie Mae appointed by Clinton include former White House counsel Jack Quinn -- who was found in contempt of Congress for withholding 3,000 White House Travel Office documents. Gore's campaign treasurer for the fall elections is Fannie Mae board member Jose Villareal, who in 1992 served as deputy campaign manager for Clinton's presidential bid.

All board members are granted the option to purchase 4,000 shares of Fannie Mae stock. When Clinton appointed Quinn he immediately received an option to purchase 3,000 shares. Villareal and Eli Segal, another presidential appointee, received bonus options to purchase 2,667 shares. This sort of thing makes a board appointment look like a huge political payoff.

But Fannie Mae tells Insight it is just a private company with a public mission. There is much more involved. "I suppose in the Depression when they were created there was a need for government sponsorship to help provide secondary-mortgage market liquidity. But with today's economy that certainly isn't the case" says Daniel Mitchell, senior fellow in political economy at the Heritage Foundation. "There are plenty of financial institutions that would jump at the chance to compete on a level playing field in the secondary-mortgage market" Fannie Mae spokesman David Jeffers tells Insight it "would welcome competition from anyone who could do the job any better."