Things at government
sponsored owned mortgage giant Fannie Mae continued to deteriorate in the third-quarter. As a result, it's requested even more capital from the emergency fund set up by the Treasury. Its bailout's price tag now totals $60 billion, and there's no light at the end of the tunnel.
Here's some detail, via Bloomberg:
Fannie Mae will seek $15 billion in Treasury Department financing after posting an $18.9 billion third-quarter net loss, according to a Securities and Exchange Commission filing late yesterday. The Washington-based company, which posted $101.6 billion in losses over the previous eight quarters, has already tapped $44.9 billion from the $200 billion emergency lifeline.
"They're going to need that $200 billion in capital, if not more, when this thing's all said and done," said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.
While depressing, this news is not altogether surprising. Fannie Mae has traditionally owned or guaranteed far more prime mortgages than subprime mortgages. While some subprime borrowers continue to struggle, with unemployment above 10% prime borrower defaults have taken over as a more major problem.
So the company has lost $101.6 billion in only two years, and the losses will continue, with nearly $19 billion just last quarter. Its $60 billion bailout has been exceeded only by AIG's $183 billion bailout. And if the analyst quoted above is right, then Fannie's aid could even surpass that frightening level.
Does anyone still think it's a good idea for the U.S. government to implicitly guarantee approximately half of the U.S.'s $12 trillion mortgage market? I sincerely hope that Washington is serious about scaling down or eliminating Fannie and Freddie, and not just replacing its capacity with broader roles for Ginnie Mae and the Federal Housing Authority.