I frankly don't trust what the American Enterprise Institute usually has to say, but this one may be right. According to a former U.S. Treasury Peter Wallison, now at AEI, the U.S. taxpayer may lose $400 billion on the Freddie Mac and Fannie Mae bail outs. Here is the Bloomberg video interview
Taxpayers will lose more than $400 billion dollars
We noted Fannie and Freddie received an unlimited bail out, on Christmas Eve. no less (some present for the U.S. taxpayer!).
Meanwhile Congress wants a probe on Freddie & Fannie's new unlimited bail out. in two different committees. Probe means hearing.
Bizarre times call for bizarre reasoning
I am too tired today to verify my memory, but I believe it is AEI that is financed and chaired by the world's largest hedge fund owner, so there may conceivably be an ulterior motive here.
That said (to employ the crude vernacular), I have no doubt it is true, but as the Fed basically owns 100% of the mortgage loans over the last 12 months, and the dollar is effectively based upon mortgage loans, the hidden agenda is probably to bolster the required support to keep those morgage loans flowing.....
AEI normally biased
There are a host of so called "think tanks" where the reports, which of course few bother to read, have deeply flawed and biased analysis. AEI is one of those think tanks in that category.
But on the other hand, this massive, unlimited bail out probably is going to cost much more than TARP!
It goes flying under the radar, released on Christmas Eve. and thus isn't getting a lot of Media scrutiny, such as it is.
In this case, I believe a $400B loss is probably on target.
But yeah, I should do a post on "biased research" as a topic by itself because there is a lot of it.
It's usually used as "snow" on Congressional staffers, to justify some lobbyist agenda.
Welcome to the "Lost Decade" - American Style
Preserving the status quo - high leverage and financial oligarchy is the name of the game.
I hope that Treasury is going to use Fannie/Freddie to start doing some serious mortgage principal reductions/debt forgiveness but I won't hold my breath. A more likely scenario will be that Fannie/Freddie will be used to prop up the mortgage and MBS markets. It will be used to provide artificial support. We probably won't address the huge overhang of bad debt out there and a result US will be just another Japan limping along with 2% economic growth but we will have high unemployment.
Happy New Year!
RebelCapitalist.com - Financial Information for the Rest of Us.
RebelCapitalist.com - Financial Information for the Rest of Us.