Bloomberg blog: Fannie, Freddie headed for trouble


Fannie Mae and Freddie Mac are both headed for trouble Washington and Wall Street battle over their ownership, according to a blog by Joe Light for Bloomberg.  

As a matter of fact, on January 1, 2018 these government-sponsored enterprises will officially run out of capital under the current terms of their bailout, the article states. At that point taxpayers would shoulder any losses.

From the article:

Granted, few people are predicting a disaster like the one in 2008, when the GSEs had to be thrown a $187.5 billion federal lifeline. But eight years later, people still don’t agree on what to do with these wards of the state. In Washington and on Wall Street, the fight over Fannie and Freddie drags on.

Despite the fact that both of the government-sponsored enterprises turned in profitable second quarters, Fannie Mae and Freddie Mac would both need bailouts if the worldwide economy crumbled, a report from the Federal Housing Finance Agency shows.

The problem? Though there has been much talk on the subject, politicians have yet to move on a decision.

From the article:

But to the GSEs’ critics, the real issue is that policy makers have yet to come up with a long-term plan. Republicans want to kill the quasi-governmental companies. Democrats have floated the idea of merging them. Hedge fund managers like Richard Perry have gone to court to claw back dividends swept up by the Treasury.

And so one of the thorniest financial questions of the early 2000s — what role, if any, should the federal government play in America’s $10 trillion mortgage market — will now fall to the next president. So far, neither Hillary Clinton nor Donald Trump have seized on the issue.

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