The Latest Development in the Immolation of America's Fiscal Position

Includes: FMCC, FNMA
by: Michael Panzner


(Image: Source)

If there is one universal truth when it comes to how governments deal with major problems, it is that: 1) the approach taken will invariably cost much more and take far longer than initial worst-case estimates; and, 2) the final solution will often be the one rejected in the first place as being too expensive and time-consuming. Case in point: the "rescue" of our nation's largest mortgage lenders. In "‘Critical’ Fannie Mae, Freddie Mac Need More Aid, Report Says," Bloomberg details the latest developments in the ongoing immolation of our nation's fiscal position by our "representatives" in Washington:

Fannie Mae (FNM) and Freddie Mac (FRE), the mortgage companies operating under U.S. conservatorship, will require additional government aid amid losses stemming from the 2008 credit crisis, the nation’s top housing regulator said in its annual report to Congress.

“While critical to supporting the ongoing functioning of the nation’s housing finance system, the enterprises would be unable to serve the mortgage market in the absence of the ongoing financial support,” said Edward DeMarco, acting director of the Federal Housing Finance Agency, said in the report released today.

The so-called government-sponsored enterprises, which own or guarantee half the loans in the $11 trillion U.S. mortgage market, operated as private companies before they were seized by the federal government amid soaring losses in September 2008. Since then, Washington-based Fannie Mae and Freddie Mac of McLean, Virginia, have survived on a promise of unlimited U.S. aid, drawing $145 billion in Treasury Department funding.

Because the companies have tightened their underwriting standards, nearly all their losses are from loans made in 2005, 2006 and 2007, “during the height of the home mortgage boom,” said DeMarco, who is scheduled to testify tomorrow at a House Financial Services Committee hearing.