Fannie & Freddie Bailouts Could Double
The Washington Post reports:
The federal bailout for Fannie Mae and Freddie Mac could double in size during the next three years, according to projections from the companies' federal regulator.
Fannie and Freddie, the federally controlled mortgage finance giants, probably will need at least another $73 billion and perhaps as much as $215 billion from taxpayers in the next three years to meet their financial obligations, the Federal Housing Finance Agency said, but much of that money would automatically be returned to the government.
The growing taxpayer infusions will cover losses Fannie and Freddie suffer on home loans, as well as payments the companies must make to the U.S. Treasury in exchange for a federal guarantee to provide cash to keep the companies solvent.
Over time, the majority of funds flowing to Fannie and Freddie from taxpayers will go to pay that dividend. As a result, most of the additional funds that go to Fannie and Freddie from taxpayers will ultimately be paid back. An Obama administration official said this arrangement is not being reconsidered at this time.
To date, the Treasury has injected $148 billion into Fannie and Freddie. Under the worst-case scenario, in which the country enters a second recession, the total infusion would be $363 billion in three years. Under this scenario, if taxpayer dividends weren't being paid, the total outlay would be $259 billion.
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