Now the Inspector General’s Federal Housing Finance Agency has issued a warning that both FNM/FRE are headed for another bailout, which is no surprise to me:
“Future
profitability is far from assured,” Federal Housing Finance Agency
Office of Inspector General said in a report, pointing out that the
firms could again chalk up losses on their derivatives portfolios,
similar to those they reported in the fourth quarter. “This increases
the likelihood of additional Treasury investment,” the report stated. - Reuters (LINK)
Similar to when Fannie was plugged full of derivatives under former
CEO Franklin Raines – who by the way had no clue how catastrophic the
situation was and should be in jail but instead received a $100 million
“you’re fired” severance agreement – the Government has once again
looked the other way while Wall Street unloaded another avalanche of
derivatives onto FNM/FRE. Once again the Taxpayers will pay for this.This is not a ‘warning” – this is a “get ready here it comes” statement. The fact is that most of FNM/FRE’s “profitablity” has been driven by the same fraudulent “mark to model” accounting that has generated most the big bank profits since 2009.
And the Government used this fraudulent accounting to suck money out of FNM/FRE. The “improved” balance sheet has enabled both FNM/FRE to issue debt to investors. The money raised has been used reload their mortgage holdings and for dividend “payback” payments to the Treasury.
FNM’s CEO warned of the possibility of another bailout in February, after announcing FNM’s smallest dividend payment to the Treasury in more than four years. This is not a warning – it’s an inevitability. The housing market is set to re-collapse, which will blow-up both Fannie and Freddie – once again.
No comments:
Post a Comment