The hits, they just keep on coming...
Freddie Mac, the second-largest US mortgage finance company, said on Wednesday it would need an additional $10.6bn from the US Treasury Department to staunch losses on bad loans.
The company said it had lost $8bn, or $2.45 per share, in the first three months of 2010. The amount includes a $1.3bn dividend payment to the Treasury Department on senior preferred stock issued as part of a 2008 government-led bail-out. Along with larger rival Fannie Mae, Freddie is propping up the housing market by purchasing mortgages in the secondary market.
Since September 2008, both Fannie and Freddie have been operating under a legal framework known as conservatorship. Together they have eaten up $136bn in taxpayer money. The final bill could be much higher. The government has pledged to provide unlimited support to the companies over the next three years. The Congressional Budget Office estimates that taxpayer aid could approach $400bn over the next decade, making the bail-out of Fannie Mae and Freddie Mac far more costly than the rescue of big Wall Street banks.
In spite of government-led efforts to modify mortgages, foreclosures continue to mount. As a result, Freddie Mac said writedowns on uncollectible loans on single-family residences had totalled $2.8bn in the period, compared with $2.4bn in the fourth quarter of 2009. Delinquencies on those residences rose slightly to 4.13 per cent as of March 31, compared with 3.98 per cent as of December 31.
Gee, do you think perhaps that it's precisely because of government-led efforts we're still in this mess? Precisely, how is enticing bad risks to stay in bad loans good for the housing market?
Of course, don't expect the Feds to change course because as they are spending your money, there is absolutely no incentive to step back and take a look at this in a rational manner and possibly come to the conclusion that their actions are simply exacerbating the situation.
As the article states (and as we covered the Christmas Eve Dump), the federal government is all in with respect to bailing out Fannie and Freddie and they will continue to dump money into both ad infinitum, ad nauseum.
Exit question: For two entities which will collectively cost us more than the eeeeevil Wall St. financial firms, where is the outrage from Congress or this administration?