More bailouts... U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac

[defendandprotect]

U.S. promises unlimited financial assistance to Fannie Mae, Freddie Mac

By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, December 25, 2009

The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress.

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009.

The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac's chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.

The administration faced a congressionally mandated deadline of Dec. 31 to increase the amount of aid it could provide to Fannie Mae and Freddie Mac, which together have already received $111 billion in assistance.

Treasury said Thursday that its decision did not mean the firms would need $200 billion or more apiece, but that it instead was seeking to assure markets that the government would stand behind the companies. In a statement, Treasury said the move "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."


By promising to keep the companies solvent, the government can maintain its sweeping power over the housing market. Fannie Mae and Freddie Mac have played a central role in Obama administration policies to keep mortgage interest rates low, restructure unaffordable mortgages, stop foreclosures and funnel money to housing programs around the country.

The Bush administration took over the firms in September 2008 as the financial crisis entered its most severe phase and promised $200 billion to keep the companies solvent. The Obama administration later doubled that figure.

While the ultimate cost of the bailouts is unknown, the administration estimated earlier this year it would cost $171 billion, and some officials said they expect it could rise further. Analysts have said it could be much higher. The cost will depend in part on how aggressively the administration continues to use the firms to stimulate the housing market because these steps could curtail profitability.

Under the terms of the latest decision, the administration's open-ended commitment will expire in 2012. Then, the firms will only be allowed to receive the balance of the $400 billion remaining today -- about $290 billion.


http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122401588.html


I've heard $800 billion on this -- and Rahm very involved --

[Orrex]

1. How about paying off the fucking mortgages?

The money would still go directly to Fannie/Freddie, and it would keep people from losing their homes, and it would allow them to spend money on other goods and services, and it would elminate a source of horrible, overwhelming in many people's lives, as well as a hundred other immediate, verifiable, tangible, and far-reaching benefits.

Holy fucking shit. How many times are they going to prop up corporations while letting individuals go belly-up?



Don't bother to answer that.

[Christa]

3. Words of wisdom. nt

[AllentownJake]

2. Zero Hedge is making some dire predictions in the private debt market next year

Essentially the Fed and Treasury have fired all their weapons at the crisis (which is still ongoing) and 2010 is going to be scarier than 2008.

That coupled with US borrowing is eating private investment at this time. These bailouts are expensive, TARP was never repaid (firms were given tax breaks in excess of their TARP payments) and the flawed system that caused the mess is still broken.

I fear the administration may have delayed things, not solved any problems.