The Bailout That Keeps On Giving

October 23, 2010 08:22


Together, Fannie and Freddie own or guarantee close to half of the nation’s $10.6 trillion mortgages. Last year the Obama Administration lifted the spending limit, placing the American tax payer in the position of the inexhaustible lender.

From The Americano

Fannie Mae and Freddie Mac, the two largest mortgage lenders in the country currently operating under government conservatorship, could require up to $363 billion in additional public funds by 2013, government regulators said Thursday.

According to the Wall Street Journal, the best case scenario would only cost the American taxpayers a $19 billion over three years, but that would only happen if the economy enters a strong recovery.

The Congressional Budget Office said in a report released in September that continued financial support of Fannie and Freddie was expected to cost taxpayers $53 billion between 2011 and 2020.

So far, Fannie and Freddie have procured $148 billion dollars from the government. The first loans to the two firms were made during the end of President Bush’s presidency under the Troubled Asset Relief Program (TARP). Original estimations made by officials and regulators had assistance funds capped at $100 billion a piece to Fannie and Freddie. President Obama increased the cap to $200 billion each as the economic environment continued to worsen. Last year, however, the Obama Administration lifted the spending limit, placing the American tax payer in the position of the inexhaustible lender.

Together, Fannie and Freddie own or guarantee close to half of the nation’s $10.6 trillion mortgages.

In an effort to appear transparent to the American public, Federal Housing Finance Agency Acting (FHFA) Director Edward DeMarco said, “These projections are intended to give policymakers and the public useful snapshots of potential outcomes for the taxpayer support of Fannie Mae and Freddie Mac.”

In August, the FHFA released its first ever quarterly report. The report showed Fannie and Freddie had used up $226 billion the past three years.

“FHFA is releasing these projections to enhance public understanding of Fannie Mae’s and Freddie Mac’s financial performance,” DeMarco said.

Not only did the two mortgage giants suffer, and are still struggling, from the effects of toxic securities, their business reputation now suffers from a toxicity as well.

Rep. Barney Frank (D – Mass), Chairman of the House Financial Services Committee, is in the re-election run of his life. His campaign’s Achilles heel? His support of Fannie and Freddie from his position as Chairman.

In a 2003 Congressional hearing, Frank downplayed concerns expressed by Republican lawmakers and regulators over the growth of Freddie and Fannie in the housing market. He said he didn’t want to emphasize “safety and soundness.” Instead, he said, “I want to roll the dice a little bit more in this situation towards subsidized housing.”

His “rolling of the dice” has put his Republican contender, Sean Bielat, within striking distance. Bielat outraised Frank in September by $70,000. In response, Frank withdrew $200,000 from his personal retirement account to contribute to his campaign.

Sean Bielat, who is a 35 year-old businessman and Marine Corps reservist, said in a televised debate, “There are few individuals more responsible [for the financial crisis] than Congressman Frank.”

“By pushing for homeownership, even among those who couldn’t afford the homes, Barney Frank put this country on a perilous footing.’’

Frank has said in response to Bielat’s attacks, “When people lie about you, you can’t just assume that they’ll go away, you have to fight back. I’m in a fight and people are lying about me and I’m fighting back.”

Continued bailouts mean continued political repercussions. As long as Fannie Mae and Freddie Mac are sinking, so will anyone with connections to them.



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