Bankruptcy

Saving Private Freddie (and Fannie)

By mcbride

The thing about all of the federal spending which has been done to prop up failing private companies is this: it does not work forever.  This means that unless the influx of money was accompanied by large structural changes in the company?s debt structure (think GM and Chrysler who restructured in Chapter 11 and even then, depending on the overall economy, those companies may not survive), the government money, our taxes, will be a band aid and no more.  Now with that as background, here is news that the cost to prop up the once private companies Freddie Mac and Fannie Mae could exceed one trillion dollars. 

 ?The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.  Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.?

 Here is a link: http://www.bloomberg.com/apps/news?pid=20601109&sid=an_hcY9YaJas&pos=10

 Michael

Full post as published by Texas Lawyer Blog on June 14, 2010 (boomark / email).