May 4, 2011
CHA-CHING:
Freddie Mac Shows Signs of Turning Corner (NICK TIMIRAOS, 5/04/11, WSJ)
The report could signal that Freddie, buoyed by U.S. job growth, has turned the corner after reporting a string of losses in 13 of the previous 14 quarters. [...]In recent months, the bottom lines at Freddie and Fannie have fared better than even the "best-case" estimates made by the firms' federal regulator last fall. The Federal Housing Finance Agency projected in October that Freddie Mac would need between $7 and $20 billion in aid for the last half of 2010. Instead, the company needed $600 million over that span.
The federal government took over Fannie and Freddie in 2008 and has agreed to pump unlimited sums to prop the companies up and keep mortgage markets from collapsing. So far, taxpayers are on the hook for around $133 billion.
In exchange, the government receives preferred shares that pay a 10% dividend. Consequently, even after the firms stop losing money, they may still have to ask the government for funds to make those payments to the Treasury. At the current rate, Freddie must pay the government $1.6 billion each quarter and Fannie must pay $2.3 billion.
The payments, which were structured by the Bush administration when it placed the companies into conservatorship, were designed to force Congress to overhaul the companies and to effectively wipe out the firms' shareholders.
Grant amnesty and we can cash in on yet another bailout.
Posted by oj at May 4, 2011 8:08 PM
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