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Happy Holiday$$ - Fannie/Freddie follies

I always like to read the news near the holidays to see who's sneakin' what in while nobody's lookin'

With the Federal Reserve ending its $1.25 trillion mortgage bond purchase program soon and the Treasury ending its $220 billion mortgage security purchase program in a week, Fannie and Freddie get a big prop.

-- Fannie and Freddie were effectively nationalized today as the government dropped all limits on its guarantees. "But, but, but" you say, "its only for three years."

-- Fannie and Freddie have drawn $110 billion of their $400 billion credit lines. The Government says they won't need to draw their full $400 billion lines. Of course, since they won't need the $400 billion, they will now get unlimited lines. (I have trouble with this line of thinking.)

-- Fannie and Freddie own or guarantee half the mortgages in the US, about $5.5 trillion out of $11.7 trillion. Quiz - Define "systemic risk" in two words or less.

-- Over the last nine quarters: Fannie lost $120 billion; Freddie, $68 billion. This good performance will be rewarded: 12 employees are in line for $36 million in bonuses. Someone in Washington has a sense of humor: the bonuses were announced on Christmas Eve. Happy Holiday$$ from Uncle $anta.

Comment: Nice work if you can get it.

Investment sentiment: Still nervous about what 2010 holds for housing.

U.S. Ends Cap on Fannie, Freddie Lifeline for 3 Years

Big Bonuses For Fannie, Freddie CEOs

Disclosure: No positions in FNM or FRE