Fannie Mae in trouble? Govt take over? Tell me what you think

Fannie Mae admits it may need fresh capital

 Ok you heard it (read it) here first.... The govt may have to take over fannie Mae?  It is a little closer that you might think.  These guys are out of capital and they are really concerned about 2009.

 Yes I have heard the economy is doing better but according to some numbers the people giving houses back to there lender is still BIGTIME.  Fannie lost a record $2.3 billion in the three months to the end of June, as more and more folks throw in the towel.

 Fannie and Freddie Mac together own or guarantee about half of all outstanding US mortgages, worth a total of $5.2 trillion, but with the value of houses dropping daily its wiped billions from the value of the underlying collateral.

 To no surprise to most of us Fannie said it would open offices in Florida and California, two of the worst affected areas, because it had taken over so many foreclosed homes in these areas.

 The company said it saw no change in the problems in the housing markets where it has a big portfolio of investments that have also declined in value. In fact, things had got worse in July, and the company said it would slash its dividend by 85 per cent to preserve cash.  This is the same company that paid the CEO a crazy bonus last yr?  Why does he loan them the money.  He has plenty according to the bonus he and fellow big shots received.

OK so now they have told everyone that they have already undertaken a series of initiatives, including raising more than $7bn in additional capital in the second quarter, to help them manage through the most difficult housing market in more than 70 years.  Most alarming is the fact that they say it was not sure about the outlook for 2009.

If the trend continues Fannie will no longer have those big reserves that they have enjoyed in the past.That would mean they would have to go the street or congress to get additional monies just to get by. Thank goodness the Treasury has said it would do whatever it takes to ensure that Fannie and Freddie do not fail, including injecting taxpayers' money in return for new shares, which could give the federal government de facto control of the companies.  Now that has got to thrill you.  I have yet to see the govt run anything successfully