"The Worst of All Worlds": Fannie and Freddie Losses "Can't Be Calculated," Posner Says

Yahoo Finance ^ | 4/12/2010 | Aaron Task

[RightGeek]

Government officials want you to know the cost of the bank bailout is going to be around $90 billion, much less than previously feared. But there is, as The Wall Street Journal put it, "one glaring exception" to this otherwise welcome news: The optimistic tally doesn't include Fannie Mae and Freddie Mac.

Technically, that's two glaring exceptions, but let's not split hairs. The troubled mortgage giants currently enjoy an unlimited line of credit from Uncle Sam, and the CBO projects their investment portfolios -- stuffed with subprime and other toxic mortgages -- will suffer combined losses of $370 billion through 2020.

"I don't think it's time to celebrate [because] the losses inside Fannie and Freddie can't be calculated," says Kenneth Posner, author of Stalking the Black Swan. "Not only do we have those [CBO estimated] losses but we still have $5 trillion in mortgage-backed securities that they guarantee and $2 to $3 trillion in debt. All of this is potentially on the U.S. government's balance sheet until we figure out how to restructure these entities."

[RightGeek]

Here's the good part: "You have this broken business model that the government is operating as if Congress had appropriated $7 trillion for direct U.S. government involvement in the mortgage business."

I guess giving taxpayer backed loans to deadbeats and illegal aliens wasn't such a good business after all. What a surprise.

[AU72]

How would a Fortune 500 Company be treated by the Gubmit if they claimed their losses were un-calculable?

[Psycho_Bunny]

What?!?!? Barney Frank said there were no problems with Fannie.

[mojito]

And the US still maintains a AAA credit rating?

[Argus]

Be sure to send the bill to Barney Frank and his “husband”, as he calls him.

[wac3rd]

A right to healthcare
A right to a lower-middle class existence via the taxpayer (food, shelter, cell phone, bilingual education, cash)
A right to an education, through college
A right to a home, irrespective of credit, job or citizenship
A right to other people’s money via taxation, regulation and litigation

All the sudden, we’re the USSR, who knew, Soetero?

[madinmadtown]

It is beginning to look as though this was a well-thought-out plan for the federal government to take over all housing in this country.

[PMAS]

*

[WOBBLY BOB]

he meant he had no problems with HIS fannie.

[wac3rd]

It makes total sense.