While Ben Bernanke and Charles Schumer thought that it would actually be a great idea if Fannie Mae and Freddie Mac could up their loan limit to help support the jumbo mortgage market, the agency that is really in charge of the matter has decided otherwise today.

Cooler heads it turns out prevailed.

That's because according to the Office of Federal Housing Enterprise Oversight (OFHEO) the maximum loan amount that the Freddie and Fannie can buy is still limited to "only" $417,000.

That, of course, is a far cry from the $1,000,000 loan limit that both the Fed Chairman and the NY Congressman were talking about putting the taxpayers on the hook for.

I say that, because while Freddie and Fannie are supposed to be just "government sponsored enterprises", if push ever came to shove everyone knows that they would be bailed out faster than you can actually say insolvency.

From Marketwatch: Loan limit to stay same for Fannie, Freddie in 2008

"Fannie Mae and Freddie Mac will have to operate under the same federally mandated loan limit in 2008 as the mortgage giants did this year, the companies' regulator said Tuesday.

"While the house price survey data used in determining the conforming loan limit show a decline over the past year, as previously announced and consistent with the proposed new conforming loan-limit guidance, the level will remain at $417,000 for the third straight year," said James Lockhart, Ofheo's director.

Last week, Freddie Mac said it is studying ways to raise capital. On Tuesday, Stephen Blumenthal, a former deputy director of Ofheo, predicted that the agency will hold both Freddie and Fannie to 30% capital surpluses above the minimum level. Lockhart, he said, is "going to continue to stay the course."

During a conference call sponsored by Keefe, Bruyette & Woods, Blumenthal also said any hope for allowing either Fannie or Freddie to buy more loans to prop up the sagging mortgage market is "gone." Fannie had floated the idea but it didn't gain enough traction."

So while so many people with Jumbo loans (which is practically the entire state of California now) had hoped that the GSE's would be able to send a little liquidity their way , the government agency that rules them has actually refused to cave in.

Of course, given what Freddie Mac revealed last week that decision couldn't have taken too long.