Fannie and Freddie Losses

[Omaha Steve]

Source: Wall Street Journal

By JAMES R. HAGERTY

When Fannie Mae and Freddie Mac report fourth-quarter results in the coming week, shareholders will be nervously surveying the damage from rising defaults on home mortgages owned or guaranteed by the two companies. Both are expected to post big losses, as they did in the prior quarter. Merrill Lynch downgraded their shares to "sell" Friday.

With housing in a deep slump, the financial health of these government-sponsored behemoths matters to Americans in general, not just their long-suffering shareholders.

Fannie and Freddie acquire home loans and hold them as investments or bundle them into securities held by other investors. They collect fees for guaranteeing payments on those so-called securitized loans -- and take a hit when lots of homeowners default. Though Fannie and Freddie are owned by private shareholders, the companies were created by Congress to help ensure a steady flow of money into housing. Investors assume the government would bail them out in a crisis.

The huge role Fannie and Freddie play in the mortgage market has grown even bigger since mid-2007, when other investors took fright and virtually stopped buying home loans other than those guaranteed by Fannie and Freddie or insured by the Federal Housing Administration. Meanwhile, another set of government-sponsored institutions -- the 12 regional Federal Home Loan Banks -- have stepped up their lending to mortgage companies cut off from other sources of funds.


Read more: http://online.wsj.com/article/SB120371654466286615.html?mod=googlenews_wsj

[Joanne98]

1. Damn!

[asteroid2003QQ47]

2. Why damn? n/t

[UpInArms]

3. financial GSEs are very dark black holes of

taxpayer liabilities.

:scared:

[defendandprotect]

4. Think we need someone to g ive us a review of how FM + FM work . . .

In my understanding, they were privatized --- ?

But that government is still indirectly responsible for their failure --- ???

Also, I believe the salaries were quite high --- plus bonuses . . . ???

[asteroid2003QQ47]

5. So if you're not...

the High Salaried Chosen, bend over!
What else is new?

[soothsayer]

6. The gov't isn't responsible for their failure, but most people BELIEVE the gov't IS.

Like "how could the gov't allow them to go under? they'd just HAVE to bail them out" sort of thinking. But there's nothing written that says they would do that. The bush admin would be perfectly happy if both went out of bidness, I think.

[defendandprotect]

7. Right . . . thanks . . . how would this benefit Bush thinkers?

[soothsayer]

8. I'm not sure, but I hear it all the time. Both GSEs are privately held

(fannie and freddie) but somehow bush still hates them and would rather have more private players in the secondary mortgage market.

[soothsayer]

9. now i remember one thing---Fannie for one has a mission to provide affordable housing

(that means for poor people~!) and to revitalize poor neighborhoods. You can imagine how the booshes would prefer their big moneyed friends to be able to buy up all the land and houses everywhere and force the poor people to godnoze where.