Unsurprisingly the GSE is still a sink hole that cash is proving difficult to fill. Instead of growing out of the training wheels, the increased burden of debt has bent the brackets, cracked the frame and flattened both tires:
Fannie Mae’s first-quarter loss ballooned on surging credit losses as the company and the Treasury Department reached agreement on a deal that doubled the government’s support level to $200 billion.
The deal, which Fannie said in a filing with the Securities and Exchange Commission was reached Wednesday, has been keeping the company afloat while under conservatorship as credit losses exploded.
Fannie requested another $19 billion Wednesday, which if approved through a preferred-stock purchase would put the total given by the government at $35.2 billion. The stock pays a 10% yield.
This is amusing considering the GSEs are being used as a tool to spike lending and, one is expected to believe, reflate the economy. Expect another large and splashy collapse into a muddy puddle and more than skinned knees this time.
Fannie’s Loss Swells; Treasury to Bolster Support [The Wall Street Journal]
Skinner: Well, I was wrong. The lizards are a godsend.
Lisa: But isn’t that a bit short-sighted? What happens when we’re overrun by lizards?
Skinner: No problem. We simply release wave after wave of Chinese needle snakes. They’ll wipe out the lizards.
Lisa: But aren’t the snakes even worse?
Skinner: Yes, but we’re prepared for that. We’ve lined up a fabulous type of gorilla that thrives on snake meat.
Lisa: But then we’re stuck with gorillas!
Skinner: No, that’s the beautiful part. When wintertime rolls around, the gorillas simply freeze to death.
(I’m sure GSE subsidization will all work out in the end.)
This is a debacle contained within a fiasco wrapped around a catastrophe. I’m amazed it’s not getting more attention.
The C-level suicide wasn’t enough to generate curiosity….maybe a Jonestown-style ritual involving all their the Risk Managers?
@2, great opening line
”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
New York Times, New Agency Proposed to Oversee Freddie Mac and Fannie Mae, September 11, 2003
sink hole that cash is proving difficult to fill. Instead of growing out of the training wheels, the increased burden of debt has bent the brackets, cracked the frame and flattened both tires:
Nice mixed metaphor.