“The White House Budget Office Estimates Cost to Taxpayers at JUST 28 BILLION”
The arrogance of the Budget Office to say that the cost to taxpayers is only 28 billion dollars. I guess they think that is pretty good, after we have already spent 151 billion, so what’s another 28 billion, right?
According to the budget office, by the end of 2011, Freddie Mac will have 39.5 BILLION in reserves and Fannie 76.9 BILLION in reserves. So in spite of these mindboggling reserves, we are suppose too kick in another 28 billion. Do you see something wrong with this picture.
Fannie and Freddie are charging higher fees for everything, which is hurting the consumer every day for every loan, but they need more money. You can’t even attempt to make this stuff up.
OMB: Total Taxpayer Cost on Fannie/Freddie Just $28 Billion
By: Brian Collins
The White House budget office estimates that losses caused by Fannie Mae and Freddie Mac’s reckless management and lending policies will shrink over the next 10 years and cost the U.S. Treasury just $28 billion.
The Treasury Department highlighted this budget projection of the eventual cost in its latest cost estimate for the Troubled Asset Relief Program.
To date, Treasury has spent $151 billion to prop up Fannie and Freddie since they were placed in conservatorships almost four years ago.
But the $28 billion loss estimate comes with a caveat. The “cost of stabilizing the government sponsored enterprises will depend on future housing market conditions,” Treasury says, including home prices, the GSEs’ market share, and other factors.
Outside cost estimates on the GSE rescue have been as high as $1 trillion.
However, Fannie and Freddie are edging closer to profitability despite continuing loan losses and their obligation to pay a 10% dividend to Treasury on outstanding lines of credit from the government. Fannie and Freddie paid Treasury $2.6 billion, and $1.7 billion of dividends, respectively in Q4.
At the same time, the GSEs continue to build loan loss reserves. At yearend 2011, Freddie had a $39.5 billion reserve, Fannie $76.9 billion.
Going forward, GSE earnings could be hurt by a Federal Housing Finance Agency directive for Fannie and Freddie to reduce their share of the mortgage market. The GSE regulator has directed the two to draw up plans for increasing their loan guarantee fees so they closely approximate private sector pricing.
In addition, FHFA wants the GSEs to enter into risk-sharing transactions starting in October.
A portion of GSE executive compensation will be based on their success in reducing the “enterprises dominant presence in the marketplace,” according to a 2012 compensation plan Fannie filed with the SEC.
image: stuart miles/freedigitalphotos.net