Fannie, Freddie Bailout Could Cost Taxpayers $25 Billion

WASHINGTON -- The proposed government rescue of the nation's two mortgage finance giants will appear on the federal budget as a $25 billion cost to taxpayers, the independent Congressional Budget Office said on Tuesday even though officials conceded that there was no way of really knowing what, if anything, a bailout would cost.

The budget office said there was a better than even chance that the rescue package would not be needed before the end of 2009 and would not cost taxpayers any money. But the office also estimated a 5 percent chance that the mortgage companies, Fannie Mae and Freddie Mac, could lose $100 billion, which would cost taxpayers far more than $25 billion.

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Read about Secretary Paulson trying to sell the rescue to the general public

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Comments

[funkalicious]

MORE LIKE THE 800 BILLION THAT THE HOUSING BAILOUT BILL AUTHORIZED.

Bill Gross of Pimco the bond dealr that has sold and packaged much of the Fannie Freddie now worthless subordinate paper. Says that the housing Crisis will reach 1 trillion before its done , probably a low ball number why scare off his bond clients.

The housing bailout blank check to Paulson and his cronies is a black mark on the democratic party.

We should be rounding up bankers who operated in the worst neighborhoods in the country the predators in the black and Latino communities. fining them seizing their assets under the rico laws and confiscating that money.

There was fraud on a colossal scale, the Democrats have extended the fraud the republicans helped orchestrate. Time to throw out all the bums out.

[cmbaldwin]

This guy should be our next Fed Chairman

http://www.ravibatra.com/

[memphispaul]

Reminds me of the cost analysis before the Iraq war...

[Henry]

The fannie and freddie have adequate capital. We hear it all the time. However, they need $25 bill or so in capital in the form of a commitment (subscription to buy) from the feds.
Now...assume that the FED needs to up rates by 225 basis points ( 2.25%) so that our rates are at some par with the rates of Europe. That increase to U.S. rates devalues the "securities" held by fannie and freddie. And...to the extent that that movement up in rates devalues securities values on the books of fannie and freddie, then they would need more capital. It's the way we play financial football in the country. It just could be anticipation between the FED and the Treasury. What a duo Paluson and Bernanke look like (Mathaeu and Randall in the odd couple?)

[allovertheplace]

Since Paul Volcker the Fed has mostly reacted to US growth and inflation as an impetus to raise and lower short term rates. "Par with Europe" is not a policy as far as I know. Europe reacts to their own set of criteria and standards. The Fed only controls very short term rates while the market determines all the other, longer rates. Even so, Freddie and Fannie have done just fine in periods of much higher rates - in fact higher rates would probably bring more buyers and liquidity. Liquidity is the problem right now because few want to buy mortgage bonds, rate level really isn't an issue.

[worldtraveller]

Yes and the war was going to cost less than 50 bil... I am so outta here.. this country is a trainwreck.

[wimisy]

If the American taxpayer is going to pay for the bailout then I strongly object to these 2 agencies using my money to sponsor a party at the Republican National Convention. If the money provided comes from taxpayers that means it comes from people in all parties and putting out money to throw a party for the GOP is the last thing they should be doing under the circumstances. I don't borrow money when I am broke to throw a party. Thank you party or not.
http://www.huffingtonpost.com/2008/07/17/fannie-mae-freddie-mac-to_n_113497.html

[javaman]

What is really amusing about this "$25 billion" dollar corporate welfare bailout is this: that number came off the top of their heads. Check out the headlines in the NYtimes today if you don't believe me.

Also given the high rate of bank failures and foreclosures and the cr*p worth of the dollar do you honestly think that there will be enough money in the FDIC to cover the bank losses????

Ha ha ha ha!!! I have bridge to sell you if you believe that.

right now, across this nation, many a wealthy person are splitting up their savings into $100,000 blocks so they will be covered.

couple that with this with the very low number of $25 bill on a $5 TRILLION dollar mortgage industry supported by the failing fannie and freddie and you have one sorry *ss situation.

[thegreatgiginthesky]

Why are the taxpayers being made to pay? None of us had anything to do with these banks being driven into the ground. The bill for this needs to be sent to the entire B-ush administration and every republican and democrat who voted to remove regulations on these finanacial institutions.

[thegreatgiginthesky]

Will we be paid back when these two companies start making money again?

[Hank25]

Fraud, People make payments on there homes with next to nothing going to the principle. They don't know how to run a business why should the taxpayers help them.

[javaman]

That's right continue supporting the crooked mortgage companies that pushed these fraudulent loans by not revealing all the details or changing them without telling the buyers. Yeah, it's all the peoples fault and not the banks, the lenders, the mortgage brokers who all stood to make buckets of money off the stupidity and gulibility of people.

So while the people are allowed to swing in the wind, the government keeps handing out corporate welfare to those same right wing entities that condemned welfare for the poor.

Two way street bucko, can't bail out one without the other.

All of this could have been dealt with 3 years ago, but f*ck head* in the white house and greenspaz the maker of this mess chose not to free interest rates on the ARM's and reset them to the offering rate. Everyone would have still made money but not as much. Oh boo hoo.

Now we as a nation are staddle with a major *ss problem and you are still whining about not bailing out the home owners???? what planet are you from?

We are so beyond that point it's not even funny.

Wake up and read the headlines you tool.

[thegreatgiginthesky]

DId you even read his comment?

[thegreatgiginthesky]

Hank is right. If you have a 30 year morgage look at an Amoritization calculator and you will realize that by the end of your loan you would have paid 3 time the priniciple amount in interest payments alone.

[Sundialsvc4]

Yawn... "swish! flick!"

There.

I just "borrowed" $25 billion "against the full faith and credit of the United States."

Now, I expect that to last a little while. Remember, you already get well more than $30 billion a month just from the United States, just from the Iraq War (this excluding the hundreds of billions of dollars you also make by selling weapons to your own country's enemies). I don't want that printing-press to get overheated.

Otherwise, fuggit... it doesn't really matter. It's just money, and as you can plainly see, I make the stuff out of thin air. And, since the world has to buy and sell oil with the stuff, and I'm sure they always and forever will continue to go-along with that, "eat, drink and be merry, my friend."

As for the rest of them, "let 'em eat cake."

[SMP]

Freddie Mac and/or Fannie Mae is FUNDING the GOP Convention................Now tell us again why we should "bail" these rip off companies out????

[MetalCanuck]

25 billion? More like 5 trillion.

[craneman]

Capitolism run Amok !!!

[MetalCanuck]

No socialism, how can you even call this capitalism when it doesn't resemble it at all.

[twofish]

Any time the government guarantees some program, some jerk will find a way to scam it and walk away with the money, leaving us taxpayers to hold the bag. There are just no downsides to stealing, especially if "everybody's doing it."

I want public ownership in return for bailing these entities out. Maybe if they knew they'd lose control of the companies, there'd be some hesitation to cheat.

Also, there should be a death penalty for corporations that commit outright crimes. Bust 'em up, sell the assets and pay off those who were cheated. If the damn supreme court can declare corporations to be persons, then let them be subject to the same laws of mortality as us suckers.

[Bettysdad]

Everyone in a management position, regarding finance, at both of these places need to be summarily fired without severance, all their assets seized for auction, and permanently barred from working in the financial industry.

You cannot cause this level of damage to America, and expect me to cover you while you go to your house in the south of France.

I want these people, and their families, living on the street.

It's enough already.

[WrongwayFeldman]

Betty...I live in the South of France.....and to use an old Stoogeism.. "I resemble that remark!"

FYI - About two months ago I saw a cruise ship parked off the Cannes shoreline. I asked someone which cruise line it was.....it was Paul Allen's yacht!

Here is my question:

If the bailout costs $25B and the cost of not bailing them out is $0B, why can't we afford to NOT bail them out?

[allovertheplace]

When it comes down to it they will probably not need to be 'bailed out' in the true sense of the term. Fannie Mae and Freddie Mac bonds have always enjoyed implicit government backing. Now it looks like they will enjoy explicit backing. These agencies didn't create the bad loans but did as they were supposed to and bought loans to sell in a secondary market. That trillion dollar market is what was saved. Perhaps there needs to be more regulation on how mortgages are given, what mortgages the GSE's should guarantee, and how much of those mortgages they should package for sale. However, If 25, 50, or 75 Billion is needed then so be it and it should absolutely fall upon the taxpayers who thought real estate values would go up forever. Otherwise very few loans will be made from here on out.