Fannie And Freddie May be "Losing Money as a Matter of Policy"
Posted May 12, 2010 by Peter Gorenstein

The Senate on Tuesday rejected a Republican sponsored measure that would effectively cut off support to Fannie Mae and Freddie Mac in two years. The government-sponsored enterprises, now in conservatorship, have already cost the government about $145 billion.

And there's no limit to how much more they can ask for for the next two years!

Fannie Mae lost $11.5 billion in the first quarter while Freddie Mac lost more than $6.7 billion. After posting those massive losses, they asked for a combined additional sum of nearly $20 billion in government assistance.

"Are they losing money as a matter of policy or are they losing it as bad judgment?" asks Dean Baker, co-director of the Center for Economic and Policy Research, who calls the Fannie and Freddie the elephant in the bailout room.

Baker and Fusion IQ's Barry Ritholtz are convinced the government is effectively sponsoring a backdoor bailout of the banks via the GSEs. "This is a conscious, willful decision," says Ritholtz, author of The Big Picture blog and Bailout Nation. "Fannie And Freddie act as a conduit for taking all this junk off the banks' balance sheets."

And Congress is along for the ride, says Baker. "To some extent the wool's been pulled over their eyes but I'd just say it's willingly. They just don't want to deal with it right now," he notes. The fear is cutting off aid to Fannie and Freddie could kill the housing industry. In the first quarter, the government backed more than 96% of all residential mortgages.

Whatever the reason, taxpayers will continue to pay the price. Ritholtz estimates Freddie and Fannie could easily cost us $400 billion combined; judging by the continued carnage "maybe that's way on the low side?" he concedes.

http://finance.yahoo.com/tech-ticker/article/483857/Backdoor-Bank-Bailout%3F-Fannie-%26-Freddie-May-be-%22Losing-Money-as-Matter-of-Policy%22

So Obama's Treasury department has found a way to get those "toxic assets" off the Bank's balance sheets afterall.

Stay tuned for more....the feds just extended a credit line to Europe and California may be the next to get a bailout...20 billion at least.

I know this isn't necessarily a popular opinion, but the only way to save the housing market is to let the prices of houses fall..

The concept of using a home as an appreciable asset needs to end.

Housing prices falling and 20% down mortgages will enable the market to stabilize and lower the risk for the buyer and lender.. That will get the market moving in a realistic and sound way..

FREE markets have a 'self-correcting' mechanism built into them ... they allow FAILED CONCEPTS to FAIL ... there's no 'too big to fail' BS at work ... Any business model that can't compete in the marketplace deserves to fail - and it also deserves the right to re-formulate itself and come back as many times as it needs to in order to 'get it right'. We do not need GOVERNMENT making the decisions the market USED to make ...

ever notice how the too big too fails are usually at the top of the list when it comes to campaign contributions?

I'm sure this has nothing to do with it, of course..