Feds confess: Fannie & Freddie still bleeding red ink

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machinehead's picture
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Feds confess: Fannie & Freddie still bleeding red ink

Two giant firms created by KongressKlowns forty years ago (and corruptly mismanaged ever since) may cost us a kool third of a trillion:

WASHINGTON (MarketWatch) — Seized mortgage giants Fannie Mae and Freddie Mac could tap as much as $363 billion in funds from the government, according to an estimate released Thursday by their regulator.

The Federal Housing Finance Agency, in its projections of the two firms’ finances, estimated they could draw between $221 billion and $363 billion through 2013. They have already drawn on $148 billion from the U.S. Treasury since being effectively nationalized in Sept. 2008, which means that the two firms could need as much as $215 billion in additional assistance.

The projection was based on three different house price assumptions -- the current forecast of a 34% peak-to-trough decline, a “stronger” assumption of a 31% peak-to-trough decline and a “deeper second recession” of a 45% peak-to-trough decline. All three of the forecasts were derived from Moody’s estimates, the FHFA said.

The assumptions also are that Fannie Mae will need roughly double what Freddie Mac needs, because Fannie Mae’s mortgage book is 45% larger.

The Obama administration has started to consider the future of the two firms, and many outside observers expect the government will retain some role in mortgage finance even if the two firms are partly or completely wound down. The White House has said it will offer up a proposal early next year.


Just as a comical historical note, the regulator of Fannie & Freddie used to be called OFHEO. After the GSEs cracked up, OFHEO's management was fired, and it was rebadged as FHFA. 

The shell game goes on -- if these two dying dinosaurs ultimately consume a 'worst case' $363 billion [note that most estimates turn out to be lowballed], the authorities may have to hang out another new regulatory shingle -- the same way mortgage fraudsters use a different shell company or fake identity on each hit. Stay tuned till 'next year,' when the bad news can be safely delivered after the election has taken place. Y'all know the drill by heart:

'Folks, I have found out that the GSEs financial situation was much worse than I had been told. Fixing it is going to require heavy sacrifices from all of us to promote the American dream of homeownership for our children.' etc. etc.


yobob1's picture
Status: Silver Member (Offline)
Joined: Apr 20 2009
Posts: 132
Re: Feds confess: Fannie & Freddie still bleeding red ink

Something I had to learn the hard way in business is to cut your losses early.  Delay only adds to the final cost.  If I were "king" I would shut them down and liquidate.  Of course this would collapse the existing mortgage system and it might be virtually impossible to get a mortgage without having a substantial down payment and solid gold credit.  The guy sitting across the desk from you would know that if he granted you a loan, he had to suffer the consequences if it didn't wok out.  He couldn't pawn off your loan to some other sucker.  What a revolutionary concept.  Naturally if we cut out all of this mortgage "subsidy" BS, home prices would fall and we might reach a point where they actually became affordable.  Who knows we might revert to where one normal income would be sufficient for a household.  Oops - there goes the daycare business. Smile

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