So much for the bailout of Freddie Mac. The mortgage guarantor lost more than seven times as much in the second quarter of 2010 than it did in the same quarter of 2009, this time losing over $6 billion. They want an additional $1.8 billion in TARP bailout money to keep operating:
Government-controlled mortgage buyer Freddie Mac is asking for $1.8 billion in additional federal aid after posting a larger loss in the second quarter.
Freddie Mac said Monday it lost $6 billion, or $1.85 per share, in the April-to-June period. The company is required to pay a 10 percent annual dividend to the Treasury Department on money it has received from the government. That made up $1.3 billion of the company’s second-quarter losses.
The company lost $840 million, or 26 cents a share, in the same quarter last year.
The government rescued McLean, Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure nearly two years ago. The new request means they have needed $148.2 billion to stay afloat, about $63.1 billion of which is being used by Freddie Mac.
The news isn’t all bad. As reader Desmond L points out, the AP report actually mentions why the two GSEs ended up in government receivership in the first place:
During the housing boom, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. When the market went bust, defaults and foreclosures piled up, and the government had to take them over.
That would be the CRA, the act that the Clinton administration and Congress strengthened in 1997-8 in order to push lenders into making riskier loans to artificially increase the number of mortgages being sold. But the CRA is only part of the story. Congress also allowed Fannie and Freddie to issue mortgage-backed securities to lessen their risk on buying subprime loans, which created a huge demand for subprime paper and encouraged people to buy beyond their means. The collapse of those bonds created the global financial collapse and forced Fannie and Freddie into receivership.
The story is finally getting told, albeit in buried paragraphs in background stories.