What Is Going On With Freddie and Fannie?

Aug 8th, 2008 @ 5:59 PM by Alden Smith

Even though Freddie and Fannie were aware of the market crisis, the pair kept revving the security engine full bore, even though Wall Street knew better, and backed away from it.  To someone like me, that is criminal intent.  Yet we are still hearing all the gushing news from Washington how good old Freddie and Fannie are gonna be okay, and Uncle will keep them afloat.  (Read that taxpayers.)

We are talking trillions of dollars here.  The pair hold nearly half of the mortgages – around 5.3 trillion the last time I looked, and to see them fall would mean sure diaster in the mortgage market and the economy.  Now, they have been given carte blanc with no statutory limits on their gigantic $5.3 trillion book of business.  Lehman Brothers the two have another $3.3 trillion in hedge funds, along with other items, off the balance sheet, so it is evident that we have no real idea of where they are at.

Things at the pair grow worse and worse by the day, as we seen failure after failure, and we hear the same old song and dance about business as usual.  Freddie and Fannie have reported more than $11 billion in pre-tax losses over the last three quarters.  I don’t look for that to improve until well into 2009.  Now the government has passed legislation that will provide bailout for the pair.  A lot of people, including myself, take issue with that.

I have no problem with trying to improve the economy, nor do I resent the government trying to keep things afloat.  What I do resent, however, is publicly traded companies that are in the basement on Wall Street, are guilty of mishandling accounts and accounting practices, and that have continually forged ahead even though the market was bleak.  I am curious to see how this will all play out…