Fannie, Freddie Fix May Cost $685 Billion, S&P Says

[denem]

Source: Bloomberg

Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the U.S. covers losses and overhauls the housing-finance system, Standard & Poor’s said.

Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a U.S. Treasury Department promise of unlimited support, New York-based S&P said today in a research report. The government may spend another $405 billion to capitalize a replacement for the two companies, which own or insure more than half the U.S. mortgage market.

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses.

Treasury Secretary Timothy F. Geithner, who has said there is a strong case to be made for continued U.S. involvement, has promised to deliver the Obama administration’s plan to overhaul the housing-finance system by the end of January. Republican lawmakers who will take control of the House of Representatives in January have called for the government to end its support for Washington-based Fannie Mae and Freddie Mac of McLean, Virginia.

Read more: http://www.bloomberg.com/news/2010-11-04/fannie-freddie-solution-may-cost-u-s-685-billion-s-p-says.html

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"$405 billion to capitalize a replacement for the two companies" Then Privatize them back into the pig pen? Things that make you go hmmm...

[Dawson Leery]

1. Let them fail!

[Yupster]

6. With interest rates at 4 %

there's no wa they can ever make a pofit. We're just blowing up the same bubble that burst in 2008.

Fannie Mae and Freddie Mac bonds are an investment of choice of teacher and all other pension funds. If they fail, the bonds are worthless, and teachers start getting notes in the mail about news about their pensions.

[ozone_man]

8. Maybe teacher pension plans should be invested elsewhere.

I can't imagine a worse place to be invested. They really need to bring an end to these two. The government should not be in the mortgage business.

[Yupster]

9. Where?

The stock market? Corporate bonds? CD's are paying less than 1 %, six month treasuries are paying .2 %, 10 year treasuries are paying 2 %.

Fannie Mae bonds were considered the safest way to get a decent return.

[ozone_man]

13. Not the stock market either.

In this environment, treasuries are probably the safest, outside of cash. In a deflationary environment, 3% is not bad. But, I don't think anyone should be investing their pension in mortgage backed securities.

[Yupster]

10. I agree with you that the government

should not be in the mortgage business, but currently, they are almost all of it.

[Mnpaul]

2. Freddie and Fannie should force the sham mortgage companies

to take back any properties for which they can't provide clear title

[naaman fletcher]

5. yes of course, but

Then the banks will need a bailout again. Well, actually they should be allowed to go under, but we all know that's not going to happen.

[Ginto]

3. I'm going to say that it will be a cool 1 Trillion. nt

[Zenlitened]

4. Key sentence: "It appears unlikely that housing & mortgage markets will be able to operate normally"

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said...

Fannie and Freddie ARE the mortgage market. Without them, there is no mortgage market.

Bailing out Fannie and Freddie is bailing out the "private" banks that originate, service, shuffle, etc. mortgages.

It can be argued that letting them fail is not an option.

But maybe the bailout can come with a few strings attached this time, please? Like, bailout actual homeowners, and let the benefits "trickle up" this time? Because that's the only way anything is ever going to get fixed.

[Roland99]

7. A possibly soon-to-be neighbor who is way far out to the right says they should be Privatized.

My unspoken to question to him that formed immediately in my mind was, "Who in *the* hell is going to buy up whatever 'assets' they have on the books at anything other than a four-alarm fire sale that will still leave the taxpayer holding the bag for hundreds of billions in losses?"

[defendandprotect]

11. What a scam this was -- and isn't this their second dip into the bail-out bin????

These were once totally under government control --

Privatized and have also paid huge bonuses to executives!!!

We're all going to be scammed over and again until we return to NEW DEAL

rules and regulations or disconnect ourselves from predatory capitalism!!

Capitalism isn't about competition, it's about killing the competition!!

[rayofreason]

12. Enron was 10% of this...

...and people went to jail.

Why are there no investigations of how this mess happened and who profited? Let's start with the folks who were at the head of Fannie and Freddie when they were making all the bad loans, buying bad paper, and claiming that all was well. I bet that the folks at the top of the pile were making millions. I say haul them into hearings to account for it all.