Would the merger of the two largest government-sponsored mortgage loan guarantors , Fannie Mae and Freddie Mac, help the troubled companies? Earlier this week, a New York Times article examined the arguments in favor of a merger.

“By merging them, they would really become too big to fail. And sometimes size can be a strength,” the article said. A merger would, in theory, benefit U.S. taxpayers potentially on the hook for millions of dollars of loan losses. First, there are the obvious savings that would come from labor force reductions. As the Times put it: “Given that the companies do pretty much the same thing…there might be opportunities for savings if many of their managers and staff are, to put it politely, redundant. Conservatively, a combined Fannie and Freddie could probably cut a third of its overhead and staff, saving some $1.2 billion annually.”

Second, there are the savings that would come from a reduction in “foreclosure costs”—the costs of maintaining and selling the thousands of homes that drop into Fannie Mae’s and Freddie Mac’s lap after the mortgage financiers foreclose on homeowners. “The costs, for everything from lawns to replacing light bulbs, can add up fast,” according to the Times. “A merged company with more leverage and buying power could probably slash an additional $300 million annually from those costs.”

A combined Fannie Mae-Freddie Mac would have a combined loan portfolio of about $4.5 trillion, according to our estimates.

The merger proposal got a lukewarm response from financial services industry insiders. David Hamermesh, research director of consumer lending for TowerGroup Inc., told BankInnovation.net that “there is some accuracy with savings as a result of job eliminations, but I do not see any significant savings out of the second without exerting monopoly power and that is what I would expect.”

He adds, “I see very little tolerance for giving Fannie and Freddie special treatment.”

Equally, Bert Ely, principal of the financial consulting firm Ely & Co. Inc., saw faults in the plan.

“There is already a concern that each company is too big to fail,” Ely says. “Merging the two does not change that picture.”

Ely argues that any combination of Fannie and Freddie would require a substantial amount of corporate restructuring.

“My sense is that the next step may have to be a government conservatorship or receivership,” he says. “Fannie and Freddie would ultimately have to be deprivatized, which would allow government to have more control.”

Ely says that if government gains more direct control, Congress could amend the charters of each company without any opposition from investors and other shareholders. “They would declare a type of bankruptcy code, but they would never be put them through the same bankruptcy proceedings as normal companies,” he says.

The American Bankers Association essentially sidestepped supporting a combination of Fannie and Freddie.

“Fannie and Freddie are in business and are building capital,” Joseph Pigg, vice president and senior counsel for the American Bankers Association, told us. “We have supported the Treasury to possess broad authority to intervene already. Regarding other avenues they could go down, we would support that, if it was necessary, for the same reasons we are already supporting the Treasury’s involvement.”

Neither Fannie Mae nor Freddie Mac would comment when asked about a possible merger.