After Enabling the Subprime Mortgage Crisis, Fannie and Freddie are still Losing Money and want Another Bailout

Posted by PITHOCRATES - November 13th, 2011

Week in Review

Fannie Mae and Freddie Mac are still losing money.  And are now asking for another taxpayer bailout.  Imagine that (see Falling home prices leads to bigger Fannie Mae loss; asks taxpayers for $7.8 billion more by the Associated Press posted 11/8/2011 on The Washington Post).

Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to cover its losses in the July-September quarter…

Michael Williams, Fannie’s president and CEO, said Fannie’s losses are increasing for two reasons: Some homeowners are paying less interest after refinancing at historically low mortgage rates; others are defaulting on their mortgages.

When property values drop, homeowners default, either because they are unable to afford the payments or because they owe more than the property is worth. Because of the guarantees, Fannie and Freddie must pay for the losses.

The problem now isn’t low mortgage rates and defaults.  That was the problem when government policy used Fannie and Freddie to create a housing bubble.  This is what gave us the subprime mortgage crisis.  Putting people into houses they couldn’t afford.  By forcing banks to qualify the unqualified.  And then having Fannie and Freddie buy these toxic mortgages from the banks.  So the banks could qualify more of the unqualified.  And continue the cycle.  All the while putting more and more risk onto the American taxpayer.  Because, as we have seen, it is the American taxpayer that bailed out Fannie and Freddie.  And now they’re asking for more money.

Government created the subprime mortgage crisis.  With their enablers of bad credit Fannie and Freddie.

Washington-based Fannie and McLean, Va.-based Freddie own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans. Along with other federal agencies, they backed nearly 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world. The companies nearly folded three years ago because of big losses on risky mortgages they purchased.

This wasn’t the banks on Wall Street causing this mess.  The deed was already done by the time they sold those toxic mortgages.  For had it not been for Fannie and Freddie they would have been no toxic mortgages for Wall Street to sell.  And no subprime mortgage crisis.

And there would have been no Fannie and Freddie mess without their overseers.  The federal government.  And their policy to put as many people into houses.  Whether they could afford it or not.

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