Fannie FNMA & Freddie FHLMC Death Watch
One only need enter FNMA, FHLMC or Fannie in our "search this blog" function to see we started banging this drum in 2004.
Of late, we reported on FNMA being worthless to common stock holders here.
And how FHLMC posted a $10 billion loss as $150 million here:
Today, Former St. Louis Fed Head Poole said Fannie Mae and Freddie Mac, the nation's biggest mortgage finance companies,
are insolvent under fair value accounting rules and the chances are increasing that the government will need to bail them out.
Freddie Mac owed $5.2 billion more than its assets were worth in Q1, making it insolvent under fair value accounting rules.
The fair value of Fannie Mae assets fell 66% to $12.2 billion and may be negative next quarter, Poole said.
"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer."
The Wall Street Journal reported that the Bush administration held talks about what to do in the event the two lenders falter.
Refuting the alligators... a spokesperson from Freddie Mac stated the firm has enough capital. Most reassuring, don't you think?
The Nattering One muses... The two companies own or guarantee about half the $12 trillion in U.S. home loans outstanding.
The companies have about $80 billion of regulatory capital supporting $5.2 trillion of mortgages.
In addition, Fannie Mae has $831 billion in company bonds outstanding, while Freddie Mac has $644 billion.
Stop and review this disaster of epic proportion in the making:
$80 billion in reserves to support $5.2 Trillion in mortgages plus $1.5 trillion in bonds issued.
When the Treasury is forced to bail out these elephantine GSE's, US Treasury debt will be downgraded from AAA, tanking the treasury market and raising rates further.
Interesting codicil, so you think the GSE's are TBTF? Too Big Too Fail? and our bank deposits are safe under FDIC?
Guess again, as the FDIC can't even cover the toxic MBS that the 12 FHLB banks are holding in lieu of treasuries under the Feds current "pawn shop" lending scheme.
And yes, the FHLB gets bailed out first, not the insured public depositors. Here is an example of what happens as calculated by the St. Louis Fed in 2000.
The global financial disaster unfolding will make 1929 look like a walk in the park.
Of late, we reported on FNMA being worthless to common stock holders here.
And how FHLMC posted a $10 billion loss as $150 million here:
Today, Former St. Louis Fed Head Poole said Fannie Mae and Freddie Mac, the nation's biggest mortgage finance companies,
are insolvent under fair value accounting rules and the chances are increasing that the government will need to bail them out.
Freddie Mac owed $5.2 billion more than its assets were worth in Q1, making it insolvent under fair value accounting rules.
The fair value of Fannie Mae assets fell 66% to $12.2 billion and may be negative next quarter, Poole said.
"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer."
The Wall Street Journal reported that the Bush administration held talks about what to do in the event the two lenders falter.
Refuting the alligators... a spokesperson from Freddie Mac stated the firm has enough capital. Most reassuring, don't you think?
The Nattering One muses... The two companies own or guarantee about half the $12 trillion in U.S. home loans outstanding.
The companies have about $80 billion of regulatory capital supporting $5.2 trillion of mortgages.
In addition, Fannie Mae has $831 billion in company bonds outstanding, while Freddie Mac has $644 billion.
Stop and review this disaster of epic proportion in the making:
$80 billion in reserves to support $5.2 Trillion in mortgages plus $1.5 trillion in bonds issued.
When the Treasury is forced to bail out these elephantine GSE's, US Treasury debt will be downgraded from AAA, tanking the treasury market and raising rates further.
Interesting codicil, so you think the GSE's are TBTF? Too Big Too Fail? and our bank deposits are safe under FDIC?
Guess again, as the FDIC can't even cover the toxic MBS that the 12 FHLB banks are holding in lieu of treasuries under the Feds current "pawn shop" lending scheme.
And yes, the FHLB gets bailed out first, not the insured public depositors. Here is an example of what happens as calculated by the St. Louis Fed in 2000.
The global financial disaster unfolding will make 1929 look like a walk in the park.
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