|
August 7, 2009 – Fannie Mae, the lending giant that provides federal backing for millions of home loans around the country, is reporting a $14.8 Billion quarterly loss for the second quarter of this year. The report means that the organization will have to borrow more taxpayer money to remain in business. It also means that it will be using money borrowed from the US Treasury to make dividend payments to the US Treasury; hardly a sustainable model.
Fannie Mae noted that there is “significant uncertainty” about its long term financial viability. The organization was essentially taken over, along with its sister company Freddie Mac, by the federal government last year. The two organizations combined provide federal backing to more than $5 Trillion in mortgages.
The Fannie Mae report will mean that the company has to borrow an additional $10.7 Billion from the Treasury. This money is needed because the company is technically bankrupt; owing more money than it is actually worth.
When Treasury took over Fannie and Freddie last year, US taxpayers essentially became responsible for their debt. The move essentially added $5 Trillion to the national debt but because of the way in which the takeover was handled, the government was able to use some slight of hand to avoid including that figure with the national debt.
In the months leading up to the Fannie and Freddie takeovers, the Bush administration had been calling for stronger oversight of both organizations. But Congressman Barney Frank successfully argued against this. Frank had a conflict of interest as he was involved in a relationship with a Fannie Mae executive.
The federal government has said that it is prepared to pump up to $400 Billion into Fannie and Freddie to keep them solvent. So far, Fannie Mae has borrowed just over $45 Billion.
byJim Malmberg
Note: When posting a comment, please sign-in first if you want a response. If you are not registered, click here. Registration is easy and free.
Follow me on Twitter:
Top Stories
|
Credit Issues 
