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The Awful Hidden Bailout You Aren’t Supposed To Know About

Todays Date: November 15, 2018

Expect dismal fourth-quarter numbers for Fannie Mae and Freddie Mac, as the Treasury moves to pacify the markets by lifting their total credit facilities beyond $400 billion.

With that move, largely ignored in the holiday rush, the White House deftly avoids a nasty, negative headline criticizing the two biggest basket cases in the markets, publicly traded companies who got the biggest total bailouts of all because they are hostage to the Congress’s every housing desire.

With Fannie and Freddie quietly failing and requiring more money, the failure of government to manage the housing market has never been so apparent. As home loan defaults continue to skyrocket, Fannie and Freddie each noted in public disclosures that the governments actions take to bailout of the real estate market will cost taxpayers more in the end.

Thus, increasing their lines of available credit is the best, and most secretive way, the administration and legislators can bail them out without attracting a lot more public scrutiny.

Consequently, even more tax payer dollars will go to the undeserved executive bonuses that the leaders of Fannie and Freddie will receive, since they got their bailout money before the initial pay guidelines were in place, and the increase in available credit does technically constitute a bailout.

Unlike Citigroup, Bank of America, AIG, Chrysler, and GM, Congress deemed that Fannie Mae and Freddie Mac had not received “exceptional assistance” and therefore did not have to have their pay decisions scrutinized by the pay czar.

Top executives of Fannie and Freddie could get paid as much as $6 million for 2009, despite the companies’ horrendous performances this year.

In 2009 the credit lines for each of them were already increased from $100 billion to over $200 billion, and now they are requesting to have that amount doubled again to total more than $800 billion, which is backed only by our governments willingness to pay the interest, with taxpayer dollars. Having received at least $100 billion in tax payer bailout moneys already, the lending giants can’t seem to find stable ground.

Usually the process goes as follows, Fannie and Freddie purchase loans from banks, alleviating the banks from any risk whatsoever, and sell them to investors, who assume all the risk for loans they know every little about. By guaranteeing or owning nearly half of all American home loans, Fannie and Freddie are positioned right in the middle of the housing market failure. That is all without including the hundreds of billions still concealed in the securitizations in their balance sheets.

Under the Treasury’s new flexible financing formula, Fannie and Freddie get more taxpayer support based on a formula that takes into account how much each company loses in a quarter. Even after the companies were forced into conservatorship, the Obama administration has continued to use them as tools to promote the administration’s efforts to keep some air in the rapidly deflating housing bubble.

These efforts have come at a time when the performance of their portfolios has continued to decline and the Administration’s plans to address foreclosures have not worked.

The author enjoys writing articles about boise real estate & boise id real estate. To learn more about these topics click on the links above!

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