Fannie, Freddie Post New Losses; Bailout Tops $150 Billion
Last week, Fannie Mae announced it lost $1.2 billion in the second quarter and asked the Treasury Department for an additional $1.5 billion to see it through.
Jul 31, 2020108.8K Shares5.1M Views
Last week, Fannie Mae announcedit lost $1.2 billion in the second quarter and asked the Treasury Department for an additional $1.5 billion to see it through. In the first quarter, it lost $11.5 billion.
It noted: “Although Treasury’s funds under the senior preferred stock purchase agreement permit the company to remain solvent and avoid receivership, the resulting dividend payments are substantial and the company does not expect to earn profits in excess of its annual dividend obligation to Treasury for the indefinite future.”
Today, its twin, Freddie Mac, announcedthat it lost $4.71 billion in the second quarter, and it asked Treasury for $1.8 billion to remain solvent. It too said it does not foresee any return to profitability.
So how did Freddie Mac end up losing so much more than Fannie Mae? The two have the same mission, but keep separate books. This quarter, Freddie lost $3.8 billion on derivatives, where it had made $2.4 billion on derivatives the same quarter a year ago. It also made $5 billion in credit losses. Still, the organization performed better in the second quarter than the first, where it lost $6.7 billion.
The total bailout for the two will now top $150 billion. Fannie Mae and Freddie Mac, which stabilize and provide liquidity to the housing market by buying up mortgages from lending banks, have a blank check from the government.
Last week, rumors aboundedthat the Obama administration, realizing Congress will likely enact no more stimulus, might force Fannie and Freddie to write down the value of mortgages — essentially bailing out underwater homeowners. Since, the Treasury Department has quashed the rumor.
Dexter Cooke
Reviewer
Dexter Cooke is an economist, marketing strategist, and orthopedic surgeon with over 20 years of experience crafting compelling narratives that resonate worldwide.
He holds a Journalism degree from Columbia University, an Economics background from Yale University, and a medical degree with a postdoctoral fellowship in orthopedic medicine from the Medical University of South Carolina.
Dexter’s insights into media, economics, and marketing shine through his prolific contributions to respected publications and advisory roles for influential organizations.
As an orthopedic surgeon specializing in minimally invasive knee replacement surgery and laparoscopic procedures, Dexter prioritizes patient care above all.
Outside his professional pursuits, Dexter enjoys collecting vintage watches, studying ancient civilizations, learning about astronomy, and participating in charity runs.
Latest Articles
Popular Articles