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Fannie, Freddie May Need Another Bailout As Washington Drags Feet On Housing Finance Reform
Be prepared for the next great transfer of wealth. Buy physical silver and storable food.
zerohedge.com / by Tyler Durden on 02/21/2016 – 19:31
Back in March of last year, the FHFA warned that Fannie and Freddie may well go bankrupt at which point taxpayers would once again be on the hook for subsidizing their own bad mortgage debt.
As you might recall, the Treasury changed the rules when it came to the GSEs a while back.
Whereas previously, the companies paid a dividend to the government on the preferred stock Washington owned, the Feds decided instead to implement a quarterly profit sweep. As Bloomberg notes, “the payments count as a return on the U.S. investment and not as repayment of the aid, leaving no existing mechanism for them to exit government control.” That’s irked equity investors who swear they’re being illegally swindled by the government.
On Thursday, we learned that Fannie was set to pay the Treasury some $3 billion after reporting $2.5 billion in profit for Q4. The company – which has received more than $116 billion from US taxpayers since 2008, has paid the government $147.6 billion to date.
“Fannie Mae’s 2015 net income was $11 billion, down from $14.2 billion in 2014,” Bloomberg wrote on Thursday. “One reason for the decline was higher income in 2014 following settlement agreements on lawsuits related to private-label mortgage-related securities.”
Because of the arrangement which prevents Fannie from holding onto its profits, the company’s capital buffer could be completely wiped out by 2018, CEO Tim Mayopoulos warns. “At that point it would be unable to weather quarterly losses and would need to draw on Treasury funds to avoid being placed into receivership.”
The post Fannie, Freddie May Need Another Bailout As Washington Drags Feet On Housing Finance Reform appeared first on Silver For The People.
Thanks to BrotherJohnF
Source: http://silveristhenew.com/2016/02/22/fannie-freddie-may-need-another-bailout-as-washington-drags-feet-on-housing-finance-reform-2/
