Fannie and Freddie – $126.9 Billion Loss
$126.9 Billion and Counting
- It was another impressive three months at Fannie Mae, as Uncle Sam’s mortgage finance company reported a fourth quarter loss of $16.3 billion. That wasn’t quite as strong as the third quarter loss of $19.8 billion, but give Fannie’s managers credit for trying.
“Through this prolonged stress in the housing market, we are helping homeowners across the country, supporting affordable housing, and providing financing to keep the residential markets functioning,” declared Fannie president and CEO Mike Williams, in explaining the losses. It takes skill and determination to lose that much money, and Fannie seems up to the task.
Keep in mind that losing money is now Mr. Williams’s job. Fannie and its sibling Freddie Mac became wards of the Treasury in 2008, after years of denying that they posed any financial risk to taxpayers. But rather than wind them down, or at least limit their losses, the Obama Administration has ordered them to modify hundreds of thousands of mortgages in an attempt to avoid foreclosures.
The companies are doing this with gusto, adding to the losses they have on the subprime and “liar loans” they piled up during the housing bubble they did so much to create. According to Fannie’s 10K filing with the SEC, the company lost $26.4 billion in 2009 from participating in the Obama Administration’s Home Affordable Modification Program.
Taxpayers will still pay for this in the end, but Treasury would rather have the losses laundered through Fan and Fred than have Congress vote for new bailout money. So last Christmas Eve, Treasury announced that it was lifting the $400 billion loss cap on the two companies, creating a potentially unlimited liability. And late Friday, Fannie announced that it has asked Treasury for $15.3 billion more to cover its anticipated losses. For those keeping score, that’s $76.2 billion so far in taxpayer commitments to Fannie, with much more to go.
Freddie reported last week that it lost $6.5 billion in the fourth quarter and $21.6 billion for all of 2009. Freddie has so far received $50.7 billion from taxpayers, and it said last week “we expect to make additional draws” on Treasury in the future. Add Fan and Fred together, and taxpayer losses so far are $126.9 billion, and counting. When the government costs of the financial meltdown are added up, Fan and Fred will be the biggest losers.
Oh, and we almost forgot: Last week, Secretary Timothy Geithner told Congress that Treasury will wait until next year to propose a plan to reform the companies so this catastrophe doesn’t happen again. Never mind that Treasury says it’s essential to re-regulate the rest of the financial services industry right now, without delay.
While we’re waiting, we can sleep well knowing that the executives at Fan and Fred are giving their all to lose even more money for the good of the nation, or at least of politicians in an election year.
