Monday, May 10, 2010

And you thought the housing bubble was over?? (FNM,WHR)

Fannie Mae (FNM), one of our nation's two housing public outhouses utilities, is requesting another $8.4billion from Treasury to shore up its capital position.  As unfair as this is for taxpayers, I don't think it's nearly as egregious a transfer of wealth as the Homepath Seller Assistance program, by which purchasers of Fannie Mae-owned properties through June 2010 will receive 3.5% of the purchase price to spend on closing costs, or even the Whirlpool(WHR) appliance of their choice!  How nice!

From the Q1 "results" press release, there are some big numbers in there:
The first-quarter loss resulted in a net worth deficit of $8.4 billion as of March 31, 2010, taking into account a $3.3 billion reduction in our deficit related to the adoption of new accounting standards, as well as unrealized gains on available-for sale securities during the first quarter. The Acting Director of the Federal Housing Finance Agency has therefore asked Treasury to provide us $8.4 billion on or prior to June 30, 2010.
I'm not really sure why they are asking for more money - why plug the gap of a negative net worth that is irrelevant anyway?  They're completely insolvent as it is, and the Treasury has guaranteed an unlimited backstop for them.  In any event, all we can hope for is to see continued interest revenue trickle down to the "preferred dividend" line, which is money returned to the Treasury:

Copyright 2010 AlphaNinja

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