Friday, February 27, 2009

Fannie Post $25 Billion Loss; Comes to U.S. for $15.2 Billion

Franfredron (for those of you new to the site that's when you combine Fannie Mae, Freddie Mac, and Enron) posted a lovely $25 Billion loss last night, and came to the pig trough called Uncle Sam for $15.2 Billion. We are watching the suckling of the teet very closely here because we were (ahem) promised that by taking over Franfredron the U.S. taxpayer would only be on the hook for "at most" $200 Billion. [Sep 7: Bailout Nation Continues - Fannie/Freddie Now Owned by You]

So I'm keeping a tab and checking it twice, to see if Hank Paulson has been naughty or nice. (naughty) p.s. not one single clawback anywhere in the system?

Let's keep these two suckling pigs straight - Fredron
  1. [Nov 14: Freddie Mac First to the Trough] $13.8B
  2. [Jan 25: Freddie Mac Saddles Up for Another $35B] $35.0B
And now Franron
  1. $15.2 B
$64 Billion Down, $136 Billion to go before we reach the "at most" promised to us.
  • Mortgage finance company Fannie Mae said Thursday it needs $15.2 billion in government aid to make up for losses from the slumping U.S. housing market. The mortgage finance company, seized by federal regulators in September, posted a loss of $25.2 billion, or $4.47 per share, in the fourth quarter.That compares with a loss of $3.6 billion, or $3.80 a share, in the year-ago period.
  • Fannie's net worth -- the value of its assets minus the value of its liabilities -- fell below zero at the end of the quarter, forcing the company to request funding from the government for the first time.
  • The Treasury Department, after seizing control of Fannie Mae and sibling company Freddie Mac last fall, pledged up to $100 billion in aid for each company, the largest buyers and backers of U.S. home loans. (cough)
  • Fannie Mae said its fourth-quarter loss was driven by $12 billion in credit losses due to declining housing market conditions, $12.3 billion in losses on derivatives and $4.6 billion in writedowns of the value of its mortgage-backed securities.
Ah, new news - I missed it last week in all the trillions we are passing around
  • Last week, the Obama administration expanded that promise to $200 billion each.
Well at least they are somewhat honest... I have to edit it to $64 Billion Down, $336 Billion to go.

When the original $200 Billion figure came out in September I said

Well it's official. We saw this day coming a long while back - starting last fall, and throughout the winter/spring as the government in its "brilliant" short sighted mode loosened regulations even further [Feb 27: OFHEO Increases Allowance for Fannie Mae] [Mar 19: Fannie, Freddie Layered with MORE Risk] to heap more and more of the mortgage market onto Fannie (FNM) and Freddie (FRE) we said this is only adding to the stress. Here are a series of posts where we predicted this day. [Aug 18: The Heat is On: Fannie Mae (FNM) and Freddie Mac (FRE)]

and you know when a government institution estimates one cost, that by the time we get there it is usually 2-3x higher. So figure $200 billion x 2-3 times = $400 billion to $600 billion cost to you

And they call me a bearish fella... see, I am always stating a probable outcome as opposed to "bait and switch". So $400 Billion it is to the 2 biggest lobbyists that Washington D.C. has ever known. Millions upon millions given to CEOs - no clawbacks though; it was a Black Swan event. No one could of seen this coming... nope.

Now again I'd like to state what I've been repeating over and over - the Federal Reserve is buying a lot of this junk and throwing it on their balance sheet. They never took that sort of risk before, but now they say it's ok "hey it's AAA rated". This is the same junk that is causing massive losses on balance sheets from Washington Mutual to Citigroup to Bear to Fannie. But when it gets on the Federal Reserve balance sheet - it's *MAGIC*. It doesn't go bad. How do I know? I don't know ... they won't release the details. Just know we're taking losses (and will take many more losses ahead as the Federal Reserve replaces our lending system and buys up car loans, student loans, personal loans, and now commerical mortgage back securities) under the cutely named TALF- but not to worry. It's all sitting in a magical places where losses go to disappear... in a galaxy far far away. Bentopia... it's like utopia but with bearded people. So think of Bentopia each time you hear about the vacuum cleaner that is the new and improved Federal Reserve - US Treasuries out, "highly rated" loans to US consumers in. Nothing can go wrong here.
  • The Obama administration also said earlier this month it will continue purchasing mortgage-backed securities from them and would allow each company to hold an additional $50 billion in mortgage securities as investments, expanding their combined portfolios to a total of $1.8 trillion.
One last thing - don't worry we're not nationalizing Franfredron. In fact you can go buy the stock tomorrow (it's fun, really!) We don't do nationalization in the United States, that's below us - that's for the socialistic backwards countries. Instead we keep the stock alive and funnel hundreds of billions into companies under the guise of the free market working. And don't you dare call that nationalization... you... you... technically correct wordsmith!

You'll Nationalize Us Over Our Dead Capitalist Bodies

[Oct 12: Fannie, Freddie Turning into Vacuum Cleaners]

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