The State of Fannie Mae and Freddie Mac: Mid-Year 2008
By: Myles, July 10th, 2008
As just reported in InmanNews, shares of Fannie Mae and Freddie Mac hit 17-year lows today (July 10, 2008) as investors’ fears about the companies’ ability to raise additional capital fueled speculation of the possibility of a government bailout.
Along these lines, the Office of Federal Housing Enterprise Oversight (OFHEO) has issued a statement on the stability and solvency of the
So in spite of government officials efforts to the contrary, reports in both the Wall Street Journal and Bloomberg have renewed talk of government intervention.
Are they really already insolvent? Former St. Louis Federal Reserve President William Poole told Bloomberg Wednesday that because the value of their assets is falling, Fannie and Freddie are already insolvent. In Pooles opinion, a longtime critic of Fannie Mae and Freddie Mac, he beleives that Congress should recognize that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer.
NOTE >> Fannie and Freddie own or guarantee about $5.2 trillion in mortgages, nearly half of the $12 trillion in outstanding U.S. home loans, and have raised about $20 billion to offset $11 billion in losses since the credit crunch hit last year, Bloomberg reported.
In a front page story today, the Wall Street Journal reported that while the government does not expect Fannie and Freddie to fail and no rescue plan is imminent, Treasury Department officials are talking about what the government could — or should — do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating.
So stay tuned to this saga regarding the fate of Fannie Mae and Freddie Mac.
Tags: Fannie Mae, Freddie Mac
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