In its Q1 balance sheet published today, Fannie Mae (FNM) reported its liabilities exceeded assets by $18.9 billion. To plug that hole, the company put in for $19 billion cash from Treasury. This request follows the $15.2 billion infusion Fannie received 6 weeks ago. Taxpayers should anticipate further payments — the Obama administration has committed $400 billion total to Fan/Fred.
Freddie has already received $45 billion.
Regarding the company’s “outlook for overall market conditions:”
We expect the current financial market crisis to continue through 2009. We expect further home price declines and rising default and severity rates, all of which may worsen if unemployment rates continue to increase and if the U.S. continues to experience a broad-based recession. We continue to expect the level of foreclosures and single-family delinquency rates to increase further in 2009, as well as the level of multifamily defaults and loss severities. We expect growth in residential mortgage debt outstanding to be flat in 2009.
The company also warned that its new status as Congressional/Administration slush fund makes its long-term financial sustainability “uncertain:”
We expect that we will experience adverse financial effects because of our strategy of concentrating our efforts on keeping people in their homes and preventing foreclosures….In addition, future activities that our regulators, other U.S. government agencies or Congress may…require us to take to support the mortgage market and help borrowers may contribute to further deterioration in our…financial condition.
OA chooses the term “slush fund” carefully. Effectively, Fan and Fred have been converted into auxilliary monetary accounts used by Washington to support its housing policy. That policy, in a nutshell, is to provide cheap credit in order to artificially inflate house prices. The nominal goal is to protect homeowners; the real goal is to protect banks’ balance sheets from real-estate related writedowns.