Fannie, Freddie bailout will cost double of earlier estimates

posted at 10:34 am on October 22, 2010 by Ed Morrissey

If you thought that we had a handle on the costs for bailing out Fannie Mae and Freddie Mac, think again. The controlling authority for the two GSEs announced yesterday that the total cost for the bailout could rise as high as $363 billion, more than double what had earlier been projected for the taxpayer bill. NBC and the AP reported on the stunning update yesterday:

Rescuing mortgage buyers Fannie Mae and Freddie Mac could cost as taxpayers as much as $363 billion over the next three years, more than double the current amount, a federal regulator said Thursday.

The two companies could end up costing taxpayers $221 billion to $363 billion through 2013, the Federal Housing Finance Agency projected. The actual amount will depend on whether home prices stabilize or take another dive, the agency said. …

When the government stepped in to take them over in September 2008, the rescue was only expected to cost a combined $200 billion. Fannie and Freddie have already received $148 billion from the government.

It’s the first time the agency has released a public estimate of the taxpayer tab. The combined bailout of the two companies is on track to be the largest of the financial crisis.

In contrast, the government propped up AIG to the tune of $150 billion, much of which got used as a way to funnel money to banks and other financial institutions to keep them solvent. AIG, however, is expected to come out of taxpayer receivership in the future, perhaps the near future. Congress has yet to do anything to distance taxpayers from Fannie and Freddie. They refused to even address the issue in the Wall Street regulation bill passed this summer, promising to find a solution at some unknown point in the future.

Now we can see that this will be a continued drain on taxpayer resources for years to come. The Obama administration admitted as much when it removed the $400 billion cap on the Fannie/Freddie bailout. And perhaps those in charge in Washington don’t want to see an end to the relationship with the two GSEs. After all, they make convenient tools for social engineering, and if they wait long enough, the American people might suffer a massive bout of amnesia and allow Congress to use them for those purposes again.

Currently, I’m reading the book You Know I’m Right: More Prosperity, Less Government by CNBC host Michelle Caruso-Cabrera. It covers a wide range of politics with a center-right, fiscal conservative approach, some of which won’t please conservatives. However, her assessment of the Fannie Mae/Freddie Mac debacle and its history is a must read, one of the best and most concise analyses I’ve yet read. Caruso-Cabrera predicted that the true costs of the Fannie/Freddie bailout would be much higher than anyone predicted and outlines how to rid taxpayers of these albatrosses — and the absolute need to do so.


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Caruso-Cabrera predicted that the true costs of the Fannie/Freddie bailout would be much higher than anyone predicted and outlines how to rid taxpayers of these albatrosses — and the absolute need to do so.

Anyone that has any basic understanding of history, the Progressive ideology, and fundamental economics could have predicted this.

But many of the voting public do not understand or care about such things it seems.

visions on October 22, 2010 at 10:38 AM

Heads up republicans: Build your cut list now…

FNMA
FMAC
NPR
PBS
NEA

save the letters; cut the acronyms.

ted c on October 22, 2010 at 10:38 AM

The NightMare Continues!!

canopfor on October 22, 2010 at 10:39 AM

This story has been embargoed in the Boston viewing area.

WashJeff on October 22, 2010 at 10:39 AM

save the letters; cut the acronyms.

ted c on October 22, 2010 at 10:38 AM

ted c:ACORN (RIP):)

canopfor on October 22, 2010 at 10:40 AM

This should make a great ad against swabberin’ Barny Fwank!

belad on October 22, 2010 at 10:40 AM

The controlling authority for the two GSEs announced yesterday that the total cost for the bailout could rise as high as $363 billion, more than double what had earlier been projected for the taxpayer bill.

That reminds me of a joke: A President walks into a Congress and says, “Give me a healthcare bill…”

Weight of Glory on October 22, 2010 at 10:40 AM

This should be the end of Barney’s Frank. If he wins re-election, Alvin Greene should move to Mass where any Dem can win.

cartooner on October 22, 2010 at 10:41 AM

Gee. Who could have seen this coming, what, with all the fine and ethical Congressional leadership from the Democrats on this issue?

Certainly not the GOP. Or anyone with two brain cells.

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Good Lt on October 22, 2010 at 10:41 AM

We need to come to a realization as a nation that ANY number the government puts forward is a gross understatement of the cost of ANY program, bill, or project.

Red Cloud on October 22, 2010 at 10:42 AM

Unexpected.

pambi on October 22, 2010 at 10:44 AM

Come to think of it, NPR is a government sponsored entity as well….

percysunshine on October 22, 2010 at 10:44 AM

Enough of this nonsense – they and Bawney have measured out their ropes, let all three of ‘em swing!

ya2daup on October 22, 2010 at 10:45 AM

Anyone that has any basic understanding of history, the Progressive ideology, and fundamental economics could have predicted this.

But many of the voting public do not understand or care about such things it seems.

visions on October 22, 2010 at 10:38 AM

You mean…like this voting public?

http://www.youtube.com/watch?v=P36x8rTb3jI

theotherone on October 22, 2010 at 10:46 AM

This is coming out just before the elections. The Dems should have coordinated better with the willing media and released this news months ago or after the election.

More fuel for voter anger

mwbri on October 22, 2010 at 10:49 AM

I guess I’ll be putting my wallet away and getting a wheelbarrow, pretty soon.

RBMN on October 22, 2010 at 10:49 AM

Yessir, Massachuetts! All the more reason for you chowderhead nitwits to re-elect Barney Frank to another term in office, so that the lisping little twit can do even more damage to the economy and the housing market!

pilamaye on October 22, 2010 at 10:54 AM

Their predictions were not about what it would cost. They just predicted the biggest number we could stomach without completely revolting.

sammypants on October 22, 2010 at 10:57 AM

I guess I’ll be putting my wallet away and getting a wheelbarrow, pretty soon.

RBMN on October 22, 2010 at 10:49 AM

I have just checked, and the domain moneybarrows.com is available. Time start your own business selling wheelbarrows designed to carry money and other personal items.

WashJeff on October 22, 2010 at 10:58 AM

WashJeff on October 22, 2010 at 10:39 AM

On TV, maybe, but Howie Carr is on this everyday like a pitbull on a porkchop.

dogsoldier on October 22, 2010 at 10:59 AM

How much money did Madoff defraud people of again? Peanuts compared to this and other federal government scams.

WashJeff on October 22, 2010 at 11:01 AM

BOHICA

mojo on October 22, 2010 at 11:01 AM

Time to cut off Freddie & Fanny and let them either sink or swim.

mizflame98 on October 22, 2010 at 11:01 AM

It’s a feature, not a bug.

Making things fair is expensive business.

reaganaut on October 22, 2010 at 11:10 AM

I also saw that foreclosures are on the way to surpassing one million. Isn’t this fine.

Bishop on October 22, 2010 at 11:11 AM

No more bail outs!!

Khun Joe on October 22, 2010 at 11:14 AM

If it is estimated at double now, wait until revision number seven.

Vashta.Nerada on October 22, 2010 at 11:16 AM

Carl Paladino is finally hitting Cuomo on his role in this disaster; he shares responsibility with Bahney Fwank: Paladino Hits Cuomo on Housing Bubble–Finally

slickwillie2001 on October 22, 2010 at 11:16 AM

The main problem with Fannie and Freddie is their hybrid nature as profit-making businesses (where salesmen are paid commissions) in good times, but with Government backing if things go south. Salesmen are encouraged to make extremely risky loans to insolvent borrowers, knowing that the Govt will bail them out, and take risks no sane private banker would take. For the salesmen, all reward, no risk; for the taxpayers, all risk, no reward.

Obama got elected during the mortgage crisis by blaming Republicans for “de-regulation”, but the real problem was misguided regulation, where Fannie and Freddie were FORCED (by Democrats) to make risky loans without criteria on the solvency of the borrower.

There are two ways out. If there should be a government-backed “lender of last resort”, then the government must set strict criteria on the solvency of the borrower, such as (monthly payment / monthly income) < 30%, and make FIXED-RATE loans ONLY. If the idea is to favor loans to low-income people, the interest rates could be low, but the borrower must be able to repay the principal within the loan term to qualify for the loan. If that means that some low-income people can't buy mansions, so be it–why should responsible taxpayers who bought homes they COULD afford bail out people with houses bigger than their wallets?

The other alternative is to PRIVATIZE Fannie or Freddie–let them make profits, but without government guarantees, and let them assume the risks any other bank would assume.

Steve Z on October 22, 2010 at 11:18 AM

Fannie, Freddie bailout will cost double of earlier estimates

…and of course one of the first things the Obama administration did was uncap this massively corruptive entity to further the hit to the tax payer.

Remember all the angst and furor over Enron…..it was a 50 billion dollar scam which is peanuts compared to what the democrats have created here.

…so who do the “adults” look to for financial leadership on the Hill:


Barney in his own words:


“I would like to get Fannie and Freddie more deeply into low-income housing and possibly moving into something that is more explicitly a subsidy,” said Frank.
“… I want to roll the dice a little bit more in this situation towards subsidized housing.”
Moreover, Frank worried that critics of lower lending standards might create “pressure” to tighten the standards, which would, in turn, lead to “less … affordable housing.

….and then they doubled down on failure with Obama making Frank Raines part of his inner circle before he was called to the mat for it.

This corruption is beyond the pale and the usual suspects are walking away with pockets full of cash while we foot the bill:


Fan and Fred: Frauds by Design?

Posted By Tom Blumer On January 8, 2010 @ 12:00 am In . Positioning, Money, Politics, US News

http://pajamasmedia.com/blog/fan-and-fred-frauds-by-design/?print=1

It’s bad enough that Fan and Fred lowered the loan approval thresholds. Pinto’s point is that for 15 years, they doubled down by “routinely” misclassifying approved loans, effectively telling the capital markets and the public that these loans weren’t as risky as they really were. Because of this, securities backed by these mortgages carried lower interest rates than they would have if the risks had been properly disclosed. Some of the offerings should probably never have been issued or should have been given junk bond pricing. Further, misrepresented loans Fan and Fred kept on their books enabled the two entities to continually make false claims of financial health.

……this corruption and lies is what the American tax payer has to deal with on a daily basis.

…and what do we get from Mr. “Hope and Change.”

Obama:


“You would think they should be saying thank you,”

Baxter Greene on October 22, 2010 at 11:18 AM

What the heck happened to the old Farmers Home Administration? We bought our first home in 1972 with a cut rate loan down to 8.5% from the then current double digit mortgages of the Carter administration. At 4.0% interest with 20% down folks should be in mortgage euphoria.

fourdeucer on October 22, 2010 at 11:22 AM

Of course if we don’t bail then out it will cost much less! There is no such thing as too big to fail. It happens all the time. EGYPT-FAIL, ROME-FAIL, British monarchy’s hold over a little tiny colony… FAIL!

The Expert Knows
http://theexpertsblog.blogspot.com

HotAirExpert on October 22, 2010 at 11:35 AM

There is no fixin’ this government.

It has to be reconstituted entirely.

esnap on October 22, 2010 at 11:36 AM

Frank-n-Dodd’s Monster.

Bruce MacMahon on October 22, 2010 at 11:40 AM

Just print some more money. It’s all going to come crashing down anyway in the next few years and we will have to start from scratch. It could get ugly out there so I would load up on supplies and ammo. I used to think people who talked like that were crazy but not so much anymore.

Hummer53 on October 22, 2010 at 12:14 PM

Baxter Greene on October 22, 2010 at 11:18 AM

If Fan and Fred were buying too-risky loans, then they were violating their federal charters all along. Both companies were chartered specifically to standaridze mortgages and make safe, plain-vanilla mortgages less expensive and thus more prevalent than the risky ones. Of course, plain-vanilla loans never earned the big profits in the secondary market either. I’ve contended for years, as did many of the GSEs’ critics, that they were routinely violating their charters and getting away with it, and their executives knew it.

rockmom on October 22, 2010 at 12:17 PM

What happens if we refuse to bail it out and just let it fail?

- Interest rates spike? Okay
- Housing prices fall? Okay

Don’t those two counterbalance? Instead of paying 4% for a $100k home, we pay 10% for a $75k home (or something like that). Either way, homes still cost about the same so people still buy them.

What else?

- No more homes are built because existing homes are cheap?

Okay, but isn’t that just reality? Do we really need many more homes? Let the market decide.

What else?

Would taxpayers somehow on the hook for Trillions invested in Fannie and Freddie? Their must be something more like that because letting them fail isn’t looking so bad right now.

elfman on October 22, 2010 at 12:21 PM

rockmom on October 22, 2010 at 12:17 PM

Great points….

They could care less because it’s not their money they are gambling with….

……….and yet no one is headed to jail.

They are getting away with this massive corruption right in front of America’s faces and the liberals who claim “superior intelligence” are going right to the polls to vote for them….again.

Baxter Greene on October 22, 2010 at 12:25 PM

Right in front of our faces……

(via Drudge)

Barney Frank rakes in $40G from bailed out banks
… despite vow to shun bailed-out lenders

http://www.bostonherald.com/news/politics/view.bg?articleid=1290601&format=text

U.S. Rep. Barney Frank, in an intensifying clash with GOP upstart Sean Bielat, has pledged not to take campaign cash from lenders that got federal bailouts — yet has raked in more than $40,000 from bank execs and special interests connected to the staggering government loans, a Herald review found.

The democratic party is not a political group….they are nothing more than a criminal organization….

Baxter Greene on October 22, 2010 at 12:30 PM

Steve Z on October 22, 2010 at 11:18 AM

Both your suggestions sound fine, but why not start by just letting them fail as suggested above?

elfman on October 22, 2010 at 12:32 PM

Why haven’t they gone after the rediculous bonuses garnered by fm and fm execs!

Hundreds of millions of dollars for giving away money

tough gig

Sonosam on October 22, 2010 at 1:07 PM

Why haven’t they gone after the rediculous bonuses garnered by fm and fm execs!Sonosam on October 22, 2010 at 1:07 PM

Because the Democrat congress was complicit, (probably some Republican’s too).

elfman on October 22, 2010 at 1:14 PM

the American people might suffer a massive bout of amnesia and allow Congress to use them for those purposes again.

I am under the impression that nothing has changed at F&F, they still offer all those sub-prime loans as before.

free on October 22, 2010 at 1:56 PM

Not to worry, we took care of all of that in the massive, it slices, it dices, it makes french fries, Ginzu Financial Regulation bill.

What? They did nothing about Fannie and Freddie in FinReg? Never mind.

MJBrutus on October 22, 2010 at 5:04 PM

Gee, do you think the MSM is catching on that the Democrats have been scamming us?

http://jammiewearingfool.blogspot.com/2010/10/shocking-video-60-minutes-admits.html

flataffect on October 25, 2010 at 12:35 AM