Fannie Mae and Freddie Mac Have Access to Unlimited Funding
Taxpayers got themselves screwed again with the Treasury giving Fannie Mae and Freddie Mac limitless funding. These two entities will never be allowed to fail. And the taxpayers will be on the hook for bailing them out in perpetuity. It’s the gift that keeps on giving.
From the 5-min Forecast:
After being put into conservatorship in September of last year, Fannie and Freddie were given a nice $200 billion government cushion. (The two mortgage misfits have already managed to burn through $111 billion of that bailout.) The Treasury announced on Christmas Eve that it has removed the $200 billion cap, “to accommodate any cumulative reduction in net worth over the next three years.” It’s a slimy move, but we’re a tiny bit impressed… what’s the point in pretending that either of these institutions will ever be allowed to fail?
As taxpayers we had no say in the matter, but as investors we take note: It would be hard to bet against any company in 2010 that’s just been written a government-backed blank check. (Shares of Fannie and Freddie opened up over 15% this morning.) Also, isn’t this an implicit Treasury forecast of more housing hurt?
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