Freddie Mac needs $10B more

You probably didn’t see this story since the state-run media and government officials don’t want to mention it. Seems that Freddie Mac needs another shovel full of cash dumped down its gaping maw.

IF you blinked, you might have missed the ugly first-quarter report last week from Freddie Mac, the mortgage finance giant that, along with its sister Fannie Mae, soldiers on as one of the financial world’s biggest wards of the state.

Freddie — already propped up with $52 billion in taxpayer funds used to rescue the company from its own mistakes — recorded a loss of $6.7 billion and said it would require an additional $10.6 billion from taxpayers to shore up its financial position.

The news caused nary a ripple in the placid Washington scene. Perhaps that’s because many lawmakers, especially those who once assured us that Fannie and Freddie would never cost taxpayers a dime, hope that their constituents don’t notice the burgeoning money pit these mortgage monsters represent. Some $130 billion in federal money had already been larded on both companies before Freddie’s latest request.

Slobbering Barney Frank? Silent. He was the biggest champion of Fannie & Freddie. He was the guy who pooh-poohed the warnings that these GSEs were headed for the toilet.

You would think that the “geniuses” in the Treasury Department (like tax cheat Tim Geithner) would be scrambling to stem the tide of red ink and, you know, actually perform their fiduciary duty to the taxpayers. And you would be wrong.

In spite of these difficulties, Freddie and Fannie are nowhere to be seen in the various financial reform efforts under discussion on Capitol Hill. Timothy F. Geithner, the Treasury secretary, offered a vague comment to Congress last March, that after some unspecified reform effort someday in the future, the companies “will not exist in the same form as they did in the past.”

Fannie and Freddie, lest you’ve forgotten, have been longstanding kingpins in the housing market, buying mortgages from banks that issue them so the banks could turn around and lend even more. After both companies overindulged in the lucrative but riskier end of home loans, they nearly collapsed, prompting the federal rescue. Since then, the government has continued to use the firms as mortgage buyers of last resort, to help stabilize a housing market that is still deeply troubled.

One wonders how long we’ll have to wait for some type of “reform” from Treasury to stop, or even slow, the flow of taxpayer money into this abyss. Based on Geithner’s promises and the inaction of congress, you’d have to think it will be dreadfully slow in coming. They don’t appear to be concerned that the losses will be staggering – after all, it’s not their money.

It’s no surprise that the government doesn’t want to acknowledge the soaring taxpayer costs associated with these mortgage zombies. The truth about Fannie and Freddie has always been hard to come by in Washington, and huge piles of money seem to circulate silently around both firms.

REMEMBER last Christmas Eve? That’s when the Treasury quietly decided to remove the $400 billion limit on federal borrowings available to Fannie and Freddie through 2012.

That stealth move didn’t engender much confidence in either the companies or their government guardian.

But because taxpayers own Freddie and Fannie, we should know more about their buying habits, as Mr. Baker points out. Unfortunately, if the government’s past actions are any indication of what we can expect, then don’t hold your breath waiting for the facts.

Remember this in November…

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One Response to “Freddie Mac needs $10B more”

  1. […] Fresh on the heels of the announcement that Freddie Mac needs $10B more taxpayer dollars (more here), comes the announcement from the other half of the “Disaster Twins” that Fannie Mae […]

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