Buy My Book Here

Fox News Ticker

Please check out my new books, "Prosecutors Gone Wild: The Inside Story of the Trial of Chuck Panici, John Gliottoni, and Louise Marshall" and also, "The Definitive Dossier of PTSD in Whistleblowers"

Monday, May 10, 2010

More Money from Fannie Mae

Fannie Mae lost a whopping more than $13 billion last quarter. Wow!! Now, they need more money.

Mortgage giant Fannie Mae (FNM: 1.06, 0.04, 3.92%) bled another $13.1 billion during the first quarter, prompting the U.S.-owned company to request another $8.4 billion cash infusion from the Treasury Department.

Fannie Mae, which was placed into conservatorship in 2008 amid enormous mortgage losses, said it lost $13.1 billion, or $2.29 a share, last quarter, compared with a loss of $16.3 billion, or $2.87 a share, during the fourth quarter of 2009.

The company blamed the heavy losses on credit-related expenses that remain “at elevated levels” due to weakness in the U.S. economy and the housing market.

“In the first quarter we continued to serve as a leading source of liquidity to the mortgage market, and we made solid progress in our ongoing efforts to keep people in their homes,” CEO Mike Williams said in a statement.

This is a black hole and no one on either side understands the issue let alone has a solution.

The problem is without Fannie/Freddie there is no mortgage market. Banks now almost exclusively rely on Fannie/Freddie to sell their loans. The other source is FHA. So, we can't just let them fail because that would set the mortgage market into a tailspin.

The Republicans are pushing reform of Fannie/Freddie but their idea of reform is nonsensical. John McCain wants to give Fannie/Freddie five years to be self sufficient or fail. First, failure is not an option for the reasons I mentioned. Second, they could very well be self sufficient in five years.

That doesn't mean that the problems will be solved. The problems will merely be masked. The problems and solutions are simple. First, there's two of them. That's a duopoly and not economically viable. So, break them up. Second, they are extensions of the government. So, fully privatize them. It's that simple.


AG said...

That's just it. They were "fully privatized" before, and nobody believed it.

One of the major issues gripping this country is the "there is no alternative" mentality toward Wall Street that dominates the thinking of both parties' leaders. It led to the debacle with Fannie and Freddie. It led to the TARP. And eventually, it will lead to Social Security cuts.

Its no wonder everybody's angry.

mike volpe said...

No, they weren't. They always received better loans from the Treasury than anyone else. That's why no one believed it.

Also, since there was two of them and they're nearly identical and creations of the government, they were seen as extensions of the government.

You are arguing out of your scope. Break them up and fully privatize them and you solve their inherent flaws.