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Fannie and Freddie's End Run



December 28, 2009 – Comments (7) | RELATED TICKERS: FMCC , FNMA

December 28, 2009 09:39 AM EST by Elizabeth MacDonald

Expect dismal fourth-quarter numbers for Fannie Mae (FNM) and Freddie Mac (FRE), 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.

Fannie and Freddie are portraits in miniature of a government distorted housing market getting a government bailout. Amid rising defaults, both made unusual disclosures recently, noting that the government's pressure on them to assist the housing market could cost taxpayers.

But by lifting their credit lifelines, Congress avoided yet another bailout for Fannie and Freddie from an already embattled, bailout-happy Congress.

Full article

7 Comments – Post Your Own

#1) On December 28, 2009 at 1:20 PM, bridgeboy0 (29.02) wrote:

Good post.  Thanks for passing along the info.

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#2) On December 28, 2009 at 1:23 PM, Option1307 (30.57) wrote:

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.

Ha ha ha, are the serious with this one? What do they think would be exceptional...Holy geez this is ridiculous!

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#3) On December 28, 2009 at 1:28 PM, Option1307 (30.57) wrote:

It keeps getting better, check out this little gem,

However, in this time of economic uncertainty, our conservator [the US government] has directed us to focus primarily on fulfilling our mission of providing liquidity, stability and affordability to the mortgage market and to provide assistance to struggling homeowners to help them remain in their homes."

"As a result, we may continue to take a variety of actions designed to address this focus that could adversely affect our economic returns, possibly significantly, such as: increasing our purchase of loans that pose a higher credit risk; reducing our guaranty fees; refraining from foreclosing on seriously delinquent loans; increasing our purchases of loans out of MBS trusts in order to modify them; and modifying loans to extend the maturity, lower the interest rate or defer the amount of principal owed by the borrower."

"Activities of that type may adversely affect our economic returns, in both the short term and long term. These activities also create risks to our business and are likely to have short- and long-term adverse effects on our business, results of operations, financial condition, liquidity and net worth."

Ha ha ha, this is awesome! You can't make this stuff up. Thankd for the laughs, good post.

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#4) On December 28, 2009 at 1:48 PM, russiangambit (28.92) wrote:

The entire jig will be up if/ when FED stops buying MBSs in March of 2010 as they originally planned. The countdown has began.

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#5) On December 28, 2009 at 2:10 PM, rd80 (95.57) wrote:

From a WSJ article on the Frannie pay packages:

"Regulators and company officials went back and forth on how the pay could be structured, in part because executives didn't want to be paid in the companies' low-value stock."


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#6) On December 28, 2009 at 3:28 PM, EnigmaDude (56.72) wrote:

the russian is right on the money.  I'm betting on my shares of FRE to be artificially inflated until about Feb. 20th or so.  Then I'll sell and take a small profit.  Might as well get back at least some of what I already contributed...

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#7) On December 28, 2009 at 3:51 PM, selfdestruct2 (31.80) wrote:

I'm taking a break from reading these blogs. The way the government is running things these days is gonna make me physically ill.

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