February 28, 2008

FLASH: Freddie Mac posts $2.5 billion loss. Or $3.7 billion. Or hell, who the f*ck knows. Mark to market anyone? You ain't seen nothin' yet folks

This turd will cost the taxpayers hundreds of billions when and if they mark to market one day.

Would you like to own the Countrywide, IndyMac and First Fed junk mortgages sitting on Freddie Mac or Fannie Mae's books today?


And what's Congress' best idea for getting out of this mess? Well it's raise the maximum mortgage limit and let them buy more loans of course!

Oh, dear god, we're so f*cked.

Big loss for Freddie Mac

Freddie Mac (FRE) posted a bigger-than-expected fourth-quarter loss and warned that a weakening economy will lead to higher credit losses in 2008 and 2009. The McLean, Va., mortgage lender lost $2.5 billion, or $3.97 a share, for the quarter ended Dec. 31, compared with a year-ago loss of $401 million, or 73 cents a share. Analysts on Wall Street were looking for a loss of $2.04 a share.

Under Freddie’s old accounting, its fourth-quarter loss would have been $3.7 billion.

Freddie’s promise to return to timely reporting was partly behind Wednesday’s decision by its regulator, the Office of Federal Housing Enterprise Oversight, to lift limits on the mortgage-portfolio holdings of Freddie and its government-sponsored sibling Fannie Mae. The hope is that Fannie and Freddie can ease the housing crunch by making the mortgage market more liquid. But as Thursday’s numbers show, the companies have plenty of problems of their own.


Anonymous said...


Note to Freddie

When you hold a TON of mortgages with negative equity, all the government induced financial alchemy in the world wont turn your turds into gold. The same long, painful unwinding will happen on a much grander scale when everyone wakes up and realizes that commodity prices too trade in boom/bust cycles.

Anonymous said...

bah what's $3.5B between friends? That's like what, 3 minutes of Benny B's printing machine at top speed. Nothing to see here folks, keep moving along.

Anonymous said...

Andrew Hac will be along shortly...

Anonymous said...

Foreigners are stupid for thinking a dollar has any value whatsoever.

Anonymous said...

Another good summary of the situation here.


I like this one.

"but are still known as government-sponsored enterprises and are still able to borrow at a lower rate of interest, because bond markets believe that the US government would not allow them to go bankrupt."

The bond market is wrong, they can... and they will.

Anonymous said...

Andrew Hac is the new dopes

Anonymous said...

Just because the government lifted the limit, why would Freddie go for it?

It's kind of like the Fed can lower the interest rate all they want and keep pumping money into the banks, but the banks are not loaning the money out to the debtors.

It WON'T work, unless you are in China, where the banks are owned by the government.

Anonymous said...

When these two turds collapse, our economy will be in such bad shape that the implicit guarantee won't be there anymore. The stockholders and bondholders are screwed.

Anonymous said...

Thankyou FDR and socialist friends

Anonymous said...


Maybe, just maybe now is a great time to buy a cheap house.

Buying a house right now lets you short the dollar, and have the US gov't, via the GSEs go long on your house.


Anonymous said...

"Andrew Hac will be along shortly..."

No doubt. He loves this stuff. All his posts seem to have a whiff of racism directed toward whites what with all of the "cracker" "redneck" and "Americano" references. Maybe I'm being a little to sensitive but it is just my impression. What is too funny when I read his posts is that the races that are getting clobbered the worst in this mess is Latins and Blacks and recent immigrants.

Smug Bastard

Anonymous said...

"Foreigners are stupid for thinking a dollar has any value whatsoever."

A Treasury official once said off the cuff that "the dollar is our currency but it is their problem".

Anonymous said...

I still hope that congress doesn't bail out Fannie and Freddie. The holders of guarenteed bonds will at least get something back while the shareholders would get wiped out completely. I assumed that a collapse of Fannie and Freddie would be the beginning of the housing panic, but now it seems that downgrading (see Moody's) could let start the panic earlier. Rating agencies, for once, do your job!

AndrewHac said...

What will it take to restore the Americano nation AKA the land of the Snapper Turtle to its former prosperity and security ?

Probably not in Dubya's lifetime.

The correction will have to be severe and painful. Joe6Pack + JaneZinfandel will have to lose at least 100 pounds each in their filthy bodily fat, retrain in their hoggy food consumption habit and practice restraint in their hog-fun reproductive orgy. Can it be done ? Yes, but bitterly and painfully the exercise will be.

And if there is even little shred of Dubya's worshipping residing in Joe6Pack's + JaneZinfandel's donkey brain, then all bets are off.

Why ? The simple equation next will prove that the Americano is as toasted as a snapper turtle skewered on a stick sizzling nicely on a bed of red hot charcoal as long as Dubya is still sitting in the John's Throne.

BUSHY = Real-Public-Cuunnt !

So, are we roasted yet ? Is it done nicely already ? How is the Hicks family coming along ? How is uncle Cracker Nuthead doing out there up in HillBilly's land with the sheeps and the goats ?

Anonymous said...

OMG, this crisis is for real.... the real deal...I would have never thought I'd see this in my lifetime.

Anonymous said...

Keith, have you seen this gem from the Fannie 10Q?

HomeSaver Advance provides qualified borrowers with an unsecured personal loan in an amount equal to all past due payments relating to their mortgage loan, allowing borrowers to cure their payment defaults under mortgage loans without requiring modification of their mortgage loans. By permitting qualified borrowers to cure their payment defaults without requiring that we purchase the loans from the MBS trusts in order to modify the loans, this loss mitigation tool may reduce the number of delinquent mortgage loans that we purchase from MBS trusts in the future and the fair value losses we record in connection with those purchases.

Anonymous said...

Got out of my Fannie Bonds six months ago. Thanks HP.

Стивен said...

From John R. Talbott's 2006 book Sell Now: The End of the Housing Bubble (pp. 143-144):

If you are squeamish perhaps you should stop reading here, for I have not told you the worst part. Remember that significant amount of debt leverage that homeoweners have on their homes that magnifies any home price decline and increases the impact on homeowner's equity? There's a counterpart to that debt that suffers as well. We cannot forget the banks, Fannie Mae, Freddie Mac, and the other institutional holders of all the mortgage paper we have ever created. Because banks, as we have seen, have become so agressive in their mortgage lending, much of this mortgage paper will be fairly worthless when home prices decline, at least as a tradeable financial instrument. Its new value will be whatever the bank can realize from the quick sale of a house in foreclosure. But if a mortgage is written on 90 percent of the value of the house, and the home price declines 30 percent, the bank will be lucky to recoup half its invested funds through foreclosure and forced property sale.

Fannie Mae and Freddie Mac are leveraged over 100 to 1 in agressive (that is, their real assets only cover 1 percent of their loans), so if only 2 percent of their portfolio experienced 50 percent credit losses, they would technically be out of business. The taxpayers would have to pick up the bill under their implied guarantees, a tab that could easily run as much as 20 percent of their total assets, or approximately $500 billion.

And vecause 40 percent of the total assets of commercial banks are residential mortgages and real estate holdings, a decline of only 12 percent in the price of their entire portfolios of mortgages and owned real estate would wipe out their total bank equity, which is typically 5 percent of their total assets.

Nouriel Roubini just testified before Congress on this very danger to a collapse of the U.S. banking system.

Keith, you should dedicate several blog posts to the warnings that John Talbott delivered in his books The Coming Crash in the Housing Market (2003) and Sell Now: The End of the Housing Bubble (2006). Then you should dedicate several more posts to the warnings that Roubini is delivering to Congress right now.

Anonymous said...

"I still hope that congress doesn't bail out Fannie and Freddie."

Freddie, Fannie, the bond insurers, and the banks are sitting on trillions of worthless paper. There is no way they can bail them out without inflation getting out of control. How does $10 gas sound?

Anonymous said...

Isn't it SAD that an Economist like Nouriel Robini can come out and give Washington an honest, detailed assessment of our current crisis, and BEN BERNANKE can look Congress right in the eye and LIE through his teeth about what is right in front of them???

Recession?? WHAT Recession?? Oh yeah, and that Subprime thing?? That didn't really happen either------What's worse, is that no one on the panel I saw EVEN BOTHERED to question Bernanke!

YEAH, we're FUC#$ED alright!!!

Anonymous said...

WOW---Thanks for the link to Roubini's Tesitmony..very good read from a man who I believe is more qualified than Boot-Licking Bernanke to give us the straight scoop.

God Man, he makes Bernanke look like a complete and utter FOOL!!

Redondo Beach dude said...

........and i feel fiiiiinnneeeeeeee.........!

Anonymous said...

If there's a bailout, everyone should stop paying their debt. Why pay twice?

Anonymous said...

Check out Nouriel Roubini's Testimony to Congress....VERY Good Read---

All I can say is UNCLE BEN's GOT SOME SPLAINING TO DO!!!!--Makes him look like such a freaking FOOL after his sheapish--"Recession, nooo...we're not in one of those" comment today.