Fannie-Freddie Bailout: $148B and Counting
On Monday, Freddie Mac reported a net loss of $6 billion, or $1.85 per share. It continued to build loan-loss reserves even as big banks like Citigroup (C), Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and U.S. Bancorp (USB) saw benefits from reducing the amount of cash held against bad debt. Credit losses climbed and its delinquency rate rose, mainly because of problem loans originated during the subprime bubble of 2005 to 2008.
Freddie Mac's conservator will request an additional $1.8 billion from the Treasury Department to keep its balance sheet in the black.
Freddie's results follow a similarly dour report from Fannie Mae last week. Fannie reported a net loss of $3.1 billion, or 55 cents per share, and will need another $1.5 billion from the Treasury. Its credit metrics were slightly better than its mortgage-finance twin, but warned that financial results will be "negatively affected" by bad loans acquired during the subprime bubble and that related expenses "will remain high in 2010."The Fannie-Freddie bailout is soon to top $148 billion and, unlike American International Group's (AIG), it stands little chance of being repaid. While AIG topped the bailout list with a one-time height of $182 billion, the firm has shaved the total down to under $70 billion, with a big chunk set to be repaid by year-end. Looking at the delinquency trends of Fannie and Freddie's loan books, it's clear the mortgage-finance giants aren't near the end of the loan-loss tunnel. That's especially true if the economy - and housing market - remain on shaky ground.
U.S. Mortgage Crisis
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