Fannie, Freddie Could Need as Much as $126 Billion in Crisis

[Purveyor]

Source: Bloomberg

August 8, 2016 — 12:32 PM EDT Updated on August 8, 2016 — 3:09 PM EDT

Fannie Mae and Freddie Mac could need as much as $125.8 billion in bailout money from taxpayers in a severe economic downturn, according to stress test results released Monday by their regulator.

The Federal Housing Finance Agency said that the government-controlled companies, which back nearly half of new mortgages, would need at least $49.2 billion.

The annual test, required by the Dodd-Frank Act, is likely to be used both by proponents of allowing Fannie Mae and Freddie Mac to build capital and by those who think there’s not an urgent need for the government to take that move.

Under the terms of the companies’ bailout agreements, Fannie Mae and Freddie Mac must send nearly all of their profits to the U.S. Treasury and wind down their capital buffers until they reach zero dollars in 2018. After that point, any loss at either company would require a draw from taxpayers.

Read more: http://www.bloomberg.com/news/articles/2016-08-08/fannie-freddie-could-need-126-billion-in-crisis-test-shows

[Igel]

1. That last quoted line says it all.

Strip the assets, in other words, and then complain that the quasi-public/quasi-private companies would need a bail out if things aren't great.

They got nearly $190 billion in bail out money. They still owe every cent of it.

As of a year ago they'd paid nearly $290 billion in "dividends" to the government. Not to any other shareholder. And none of their profits has gone to paying down the capital, that $190 billion.

They're indentured.

Granted, it does help to keep down the deficit, which was well over $400 billion last year and headed for $500 billion this year. Then again, they don't make a profit each quarter. (Freddie apparently lost money in 1st quarter, but fortunately didn't need another un-redeemable bail out.)

[Festivito]

2. The old W* Bush SEC legacy continues. eom