Press Release Articles

All real estate investors can expect bad news regarding this 4th quarter of 2009 after Freddie and Fannie requested a $400 billion ceiling in their credit pool.

With this increase in available credit for the federal corporations, the Obama administration simply avoids the embarrassment and humiliation of addressing the failures of these institutions in public media, after all they already received more bailout money than any other corporation due to their close ties with government officials.

There is no better example of what happens when the government tries to manage a market than what has happened to these 2 government corporation and the corresponding performance of the housing market. With home defaults continuing to increase, each federal corporation divulged information regarding the governments insistence they help out the housing market will cost Americans.

Thus, increasing their lines of available credit is the best, and most secretive way, the administration and legislators can bail them out without attracting a lot more public scrutiny.

Now, don’t think that the executive pay guidelines recently installed by the new “Pay” Czar will apply to either of them, given that they received their bailout money well before the pay guidelines were put in place, and they credit increase isn’t considered a bailout.

Unlike Citigroup, Bank of America, AIG, Chrysler, and GM, Congress deemed that Fannie Mae and Freddie Mac had not received “exceptional assistance” and therefore did not have to have their pay decisions scrutinized by the pay czar.

With their $6 million bonuses being backed by the government, the executives for Fanny and Freddie have no incentive to perform better.

With lines of credit allotted to each corporation already increased by over 200% in 2009, a further increase of another 100% being requested will simply be added to the tax payer tab and will require a very long time to pay back, if it ever does get paid back. With a combined total of over 100 billion of our taxpayer dollars already doled out to Fannie and Freddie, the government simply allows more money for them.

Usually the process goes as follows, Fannie and Freddie purchase loans from banks, alleviating the banks from any risk whatsoever, and sell them to investors, who assume all the risk for loans they know every little about. With a combined liability for home loans exceeding 5.5 trillion dollars, or what amounts to about half of all U.S. mortgages, they are placed squarely in the middle of a failing real estate market. The two also have hundreds of billions of dollars more in securitizations stuffed off their balance sheets.

After being granted the backing of being given added “credit” based on their loses in a quarter, based on the Treasury’s recent flexible financing formula, Fannie and Freddie have no incentive to right themselves. Given President Obama’s efforts to stabilize the housing market and stop the slide in housing prices, even with Fannie and Freddie under conservatorship, they have been touted to promote the failed policies pushed by the government.

As a taxpayer, you are left to wonder why all of your money is being spent on a secret bailout for federal corporations whose portfolios only continue to decline in value, by our President whose plans to stop or slow foreclosure have been an abject failure.

The author enjoys writing articles about boise real estate & boise id real estate. To learn more about these topics click on the links above! Click here to get your own unique version of this article with free reprint rights.