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Fannie Mae Needs $7.8B More From Taxpayers

From a tight-lipped Reuters:

Fannie Mae taps $7.8 billion from Treasury, loss widens

By Margaret Chadbourn
Tue Nov 8, 2011

WASHINGTON (Reuters) – Fannie Mae, the biggest source of money for U.S. home loans, on Tuesday said it needed a further $7.8 billion in federal aid to stay afloat as a shaky housing market widened its third-quarter loss to $5.1 billion.

The government-controlled firm also attributed the deeper cash drain to losses on derivatives used to hedge its exposure to interest-rate swings and on expenses related to home loans made prior to the 2008 financial collapse. In the year-earlier quarter it had a loss of a $1.3 billion.

What’s this?! Fannie Mae used derivatives to protect itself from its bad loans? And they are still using them? Where is Dodd-Frank?

(Just kidding. Dodd-Frank did not touch Fannie Mae or Freddie Mac. Both of which agencies are the creation of Democrat Congresses.)

By the way, nine (excerpted) paragraphs later, we finally hear:

Freddie Mac, the second-largest source of U.S. mortgage finance, said last week it lost $4.4 billion in the third quarter and needed to borrow an extra $6 billion from the federal government.

Fannie Mae has now reported losses in 16 of the last 17 quarters. It reported a profit of $73 million in the fourth quarter of last year, but that was largely attributed to a one-time payment from Bank of America.

And there is no mention anywhere in this article that US taxpayers have spent $169 billion dollars to rescue Fannie and Freddie. Which makes them the most expensive bailout of the entire 2008 financial crisis, and thereby the most expensive bailout in the history of the world.

We also do not hear that the government estimates it will cost at least another $51 billion dollars to support these two companies through 2014.

Likewise, no where in this entire article do we hear that the executives in Fannie Mae and Freddie Mac were rewarded with bonuses totaling almost $13 million dollars – for their splendid work.

This article was posted by Steve on Wednesday, November 9th, 2011. Comments are currently closed.

8 Responses to “Fannie Mae Needs $7.8B More From Taxpayers”

  1. GetBackJack says:

    Collect the extra capital from Chris Dodd and Barney Frank

  2. faxforsen says:

    Let us not forget a big reason why US banks relied more and more on non credit products and tried harder and harder to get the right to trade and hold securities.

    In the 1960’s the agencies represented less than 5% of the home loan market. They were set up to deal with marginal borrowers and specific subsets of borrowers (farmers, veterans, for example.) People went to a bank for a home loan and the home loan was the centerpiece of an overall banking relationship. Your access to credit, especially for small businesses, was tied into the equity behind a 20% down mortgage in a market that saw pretty steady appreciation of the underlying asset.

    The agencies used their political ties and lobbying influence to ratchet up their market share from a couple percent to well over 50% of all mortgages by the 1980’s and essentially used government favoritism to displace private sector lenders who were providing a product at a reasonable price to most creditworthy individuals who were holding a steady job and earning at least 2x above the poverty level and could scrape together 20% down.

    Not only did the agencies take over the majority of the market by constantly expanding the maximum loan they could make until we are in excess of $700k, they re-defined the product in such a way that banks could not compete as the source of capital (i.e. holding a significant portion of mortgage loans on the books.) Banks still had networks that were excellent for origination of the loans and originate they did.

    Fannie and Freddie would say what they would take and the banks (and thousands of brokers) produced the mortgages. Higher amounts, no problem. Lower credit standards, no problem. No documentation, liar loans, NINJA loans; all were sought after by the agencies. Their analysis consisted largely of the BarneyFrankian observation “mortgages almost never default so you don’t need capital behind the guarantors of those loans! ”

    As long as the government is the dominant player n the mortgage market, we will have a political market rather than a free market. Pricing signals are broken and time is spent on manipulating the government for profit rather than buying and selling homes at a true clearing price.

    • proreason says:

      good post

    • tranquil.night says:

      Dittos. Thank you.

    • GetBackJack says:

      Savings and Loan scandal 1980s — Resolution Trust, and it’s scandals — uner Carter market rates fluctuate so wildly S&Ls are often hung out to dry with impossible loan terms driven by a savaged value of the dollar — March 1980, DIDMCA — 1980s into 90s, first deregulation, the re-regulation leaves S&Ls whiplashed.

      … and I could go on, but this stupendous debacle has been a long time in the making, otherwise known as chickens home and roost as a result of federal policies trying to make water run uphill, the sun rise in the west and tugging on Superman’s cape is without consequence.

      BTW – do you know that the majority of mortgage holders would happily proffer loan repayment grace and extensions to many mortgagees but for one small problem?

      The federal government requires it’s member banks and servicing units to hold ironclad to foreclosure and repossession standards.

      So, once again, the market cannot make it’s own way, but is forced by The Feds into the actions so painful to so many.

  3. proreason says:

    Speaking of financial rape….sometimes Jon Stewart wields the knife as well as it can be wielded:


    Corzine (ex Sachs CEO in case you didn’t know), is surely one of the lowest scum to ever walk the face of the earth…right up their with Witch, the Reaper, and the Moron.

  4. River0 says:

    We’re like the children of alcoholic parents who are completely out of control. The worst thing we can do is stick by them out of misplaced loyalty.

  5. Airmail56 says:

    Declare marshall law. Surround their headquarters with a nice Marine division. Conviene swift military courts. Execute the people that sought to bring down this country.

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