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Fannie And Freddie Money Pit May Suck Down $1 Trillion Of Taxpayer Cash

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posted on Jun, 17 2010 @ 12:59 AM
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Fannie And Freddie Money Pit May Suck Down $1 Trillion Of Taxpayer Cash


Bloomberg checked in on the state of Fannie Mae and Freddie Mac, the two once-quasi-private mortgage subsidy companies that are now almost wholly owned by taxpayers. Bloomberg found that Fannie and Freddie have already drawn down $145 billion in their unlimited line of taxpayer credit, and that their losses could ultimately be as high as $1 trillion.

To put that in context, Fannie and Freddie alone may consume more than the entire TARP Wall Street bailout, which was in the neighborhood of $800 billion. Fannie and Freddie's taxpayer-money-vaporization will likely dwarf even that of AIG, which most people still consider the most appalling bailout beneficiary of all.


More bailouts in the making. I wonder how the government is going to sell this one off in light of all the budget problems?

Even more interestingly....


Also, the Fannie and Freddie losses are functioning as a back-door Wall Street bailout: Fannie and Freddie are using the taxpayer cash to buy mortgages from Wall Street, and they are paying prices so high that they're taking a loss.


I guess this explains why the stock market has not self-destructed even though the economy is in the suck tank.




posted on Jun, 17 2010 @ 01:13 AM
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reply to post by wutone
 


This story is very inaccurate. Why do they only say TARP was $800 billion?

Regardless, this;


Bloomberg checked in on the state of Fannie Mae and Freddie Mac, the two once-quasi-private mortgage subsidy companies that are now almost wholly owned by taxpayers. Bloomberg found that Fannie and Freddie have already drawn down $145 billion in their unlimited line of taxpayer credit, and that their losses could ultimately be as high as $1 trillion.


Is fairly accurate. What happened was these two institutions basically got stuffed full of toxic assets which are being shifted onto the public balance sheet. There have already been unlimited bailouts approved for these two. But they are asking for a further 860 or billion. So far.

But the actual amount of debt they have and are currently hiding is much larger.

As you said OP I agree this is the only reason the stock market has not self destructed.

But there cannot be too many more of these bailouts before there starts to be real problems.

I think Bernanke will handle this by using QE to try and address the contraction of credit. But it will be one of the last times he can. This situation is unsustainable, and with the total shambles the reform bill ended up becoming there is little that will be done to fix it.

I am very worried about the USA.



posted on Jun, 17 2010 @ 01:15 AM
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reply to post by wutone
 


F&F are being used a Corporate Shell Company. This is the philosophy:

You take the good assets, and you divide them among your good companies (in this case, the mega banks, Bank of America, Goldman, etc) .. You then use this company as the storehouse for all your bad debts, in this case specifically mortgages. So lets look at like this..

Bank A writes 1,000 mortgages.
Bank A sells 1,000 mortgages to Bank B at a 10% premium, bank B's return will be long term investment on people paying their interest.
Bank B has a 25% fail rate on the mortgage bundle, 250 mortgages are now delinquent. Bank B then sells 250 mortgages to Frannie or Freddie, at a nice premium.
Bank B then has 750 well preforming mortgages, and made a profit off 250 non-preforming mortgages.
F&F absorb the losses through an unlimited tax payer funded reserve to basically pay banks to take their garbage.

all the banks in the process make money, except F&F .. and not only that, but removing poor preforming mortgages then opens reserves to write more mortgages, making more money.

Most Americans have no way of understanding this, it's beyond them so they don't care.. but it is by all means theft, plain and simple.. banks profit big time, while we as a nation get screwed.



posted on Jun, 17 2010 @ 10:15 AM
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reply to post by wutone
 


"I guess this explains why the stock market has not self-destructed even though the economy is in the suck tank."

This statement says it all. Why such a focus on the banks and wall street, and nothing to help the economy and the overall people in general? This is a great question that falls back on a society made up of and run by the me me me`s, and I I I`s. This will continue as long as we live in this manor, and allow society to dictate to us, how we are to live. It`s all about the small group of greedy, self centered few who believe they control us, and all reality. It will never be about helping humanity as a whole, as long as "we, humanity", allow them to be in control of the overall reality we live in and see around us. When enough people take back control of their own thoughts, without the few dictating what they are to think, will this change for the overall good.



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