Fannie Mae losing money hand over fist

Most people have forgotten that we nationalized the GSE's last year. Yet the cost of that nationalization is only growing larger and more expensive.

( -- Fannie Mae, the troubled mortgage finance company, reported a first-quarter loss of $23.2 billion on Friday.

The mortgage giant also reported that it submitted a request for $19 billion from the Treasury Department to cover its losses. That followed a request earlier this year for $15.2 billion to cover 2008 losses.

It also said Treasury has doubled its support level to the company to $200 billion, as President Obama had authorized.

A hundred billion here, a hundred billion there. Pretty soon we are talking about real money.

Going forward, the mortgage giant said that it fully expects to ask for more financial support from the federal government.

"Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury," said the company, in its quarterly report.
Fannie Mae said it imposed a moratorium on foreclosures for most of the quarter. But that failed to stop foreclosures from increasing, compared to the prior quarter. The company said it acquired 25,374 single-family homes through foreclosure in the first quarter of 2009, compared to 20,998 in the fourth quarter, 2008.

"I think Fannie Mae is largely used as probably the single largest tool of the government right now to try and reverse the losses in the mortgage market," said David Ursani, analyst for Wall Street Strategies. "As a result of that, a lot of those losses are funneling through [Fannie Mae.]"

Ursani said it's difficult to tell when Fannie Mae's situation will improve, given its unusual status as a government-supported entity, and the dismal state of the mortgage market.

"Fannie Mae, right now, is pretty much part of the government," he said. "I can't really see it becoming independent from the government anytime soon."

And there you have it. The GSE's are the government's tool to propping up an unsustainable housing bubble, thus its losses will continue to increase as long as the housing bubble deflates.

But it doesn't end there. If you thought losing $23 Billion in a single quarter was bad, look at what the results should have been at its GSE competitor Freddie Mac.

Freddie Mac has received a favorable ruling from the Securities and Exchange Commission that will allow it to avoid what the company had feared might be a $30 billion charge against earnings, John Koskinen, acting chief executive officer, said in an interview.

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here is where I think conservatives have a real point

They are all about smaller government, no intervention...

but I see it as we have corporate run, stupid government...

So, who can blame them with their 'free' market, small government, low tax mantra when this is the performance of governments that are corrupt as hell with corporate agendas.

Maybe we should retire the term nationalization for this is not even close to what Sweden did.

This is like having BoA and Citigroup CEO mentality but now part of the government (officially).

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You are right about 'nationalization'.

This is not nationalization. In fact Fannie is still a publicly traded company which opens up a bunch of other problems (ie. shareholder lawsuits).

Treasury and Fed are using Fannie/Freddie to reinflate the bubble. But I think they are losing control of the situation as these losses are indicating. At some point, they have to realize that more liquidity is not the answer.

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Are you kidding me Robert?

They are all about smaller government, no intervention...

Were you sleeping the last eight years? They are all about the complete opposite of what they yammer about. The only difference is they scream louder than everybody else.

They created the largest government agency in our history, trampled the Constitution, peoples civil rights and are into everybodies business. In fact the only freakin thing they didn't "intervene" on was Wall Street corruption.

It has always been about class warfare.

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Were you sleeping the last eight years?

If you think fiscal conservatives were in power for the last eight years, you're the one who must have been sleeping.

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There is more than one race of conservative

Yes, conservatives were in fact in charge during the last 8 years. They just weren't the Ron Paul-type, nor the fictional Ronald Reagan-type (that never actually existed), nor the Barry Goldwater-type.
Instead the conservatives that were in charge during the last 8 years were the Benito Mussolini-type.

If you think the Big Brother actions of recent conservatives precludes them from being conservatives then I suggest you take the blinders off. All political philosophies have a dark side. Every single one of them.

Liberals span the spectrum as well. From FDR to Huey Long to Ralph Nader to Bill Clinton to European socialists to pseudo-communists.
Unfortunately we have another Bill Clinton in charge today.

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What we saw this past 8 years...nigh I would say 25

years was not real "conservatism," that is adherence to sound fiscal and monetary policy, non-interventionist foreign policy, and strict constitutionalism. Reagan, for all the talk about him being a conservative, expanded the budget and poked his nose all over the world. When he finished his term, the national debt went from about 40% of the GDP to about 70%. Both he and Papa Bush continued the habit of establishing budget deficits. Reagan was basically a conservative in name only, with solely his slashing of the past high tax rates as his standard bearer of his ideology.

Clinton, well I'll give him credit for paying off some of the debt. We even had a budget surplus here or there. But a lot of his effort in this was buoyed by a bubble in the stock market and the fact that he (along with his predacessors) borrowed from the Social Security trust fund. I am only bringing up Clinton because a lot on the left have referred to him as the closest thing to the Democrats as a "fiscal conservative."

As for 'W', honestly, do I have to bring up his irresponsibility? He's labeled a conservative more for social stances and foreign policy, though as I've stated, the classic variety of American Conservatism doesn't jive with Neo-Conservatism. Indeed, if anything, Bush is like some sort of hybrid fiscal juvenile/conservative mutant.

It all comes down to this:

1) Don't leave a debt or one that cannot be payed back in a generation.

2) Don't get entangled in foreign situations where it would bleed the purse or our liberties.

3) Don't spend more than you bring in.

4) Respect property rights.

5) Respect those inalienable rights of Man.

6) Follow the U.S. Constitution. and respect the separation of powers between the Federal government and the States.

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Yes, conservatives were in fact in charge during the last 8 years.

Sure, conservatives were in power, but not fiscal conservatives. There are a few fiscal conservatives in congress (Ron Paul represents one strain). But, we haven't had one in the Presidency in a long, long time.

If you think the Big Brother actions of recent conservatives precludes them from being conservatives then I suggest you take the blinders off.

The previous administration's Big Brother actions have nothing to do with their fiscal policy, which is what I thought this discussion was about.

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two types of conservatives

the ones you see on FAUX news who manipulate populist sentiment in order to continue the corporate agenda...

and the real ones who probably would be represented by people like Ron Paul, etc.

I'm talking about the real ones, not the corporate wolves.

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Fannie/Freddie probably would have

been better suited to be a glorified hedge fund. They could have been purchasing distressed mortgages for pennies on the dollar and then truly modifying the loans - all the terms in order to keep people in their homes. But no they rather do this half-ass.

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We can't even nationalize a company correctly anymore

Honestly, we've gone from a privately-held zombie to a semi-nationalized created zombie! Do it right, or separate the operating mortgages into a new firm and kill off these bastards. Like a previous poster said, either do it the Swedish way or start thinking of doing it the Austrian School of Economics way!

And I know this will sound harsh, but some people need to be foreclosed on. We have to be realistic here. Help those financially who truly have a chance of making the payments when things improve. As for those who just want the house/condo but know damn well they could never afford it, time to get a local agency to assist in finding them a rental unit and temporary help with the rent. What we have now is the equivalent of poking a festering boil without treating it; eventually nothing good will come of it.

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