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by Free Market Duck

$145 Billion and Counting

By Wall Street Journal Op Ed
(May 11, 2010)

New York, NY -- Fannie Mae yesterday announced its 11th consecutive quarterly loss—$11.5 billion—and asked for another $8.4 billion in taxpayer assistance. When it comes to losing money, nobody does it better than this government-created mortgage investor.

  Fannie Mae is the Cal Ripken of bad real-estate deals, reliably pouring taxpayer money into the housing market. Granted, Fannie faces tough competition from its toxic twin, Freddie Mac, which last week announced its own request for another $10.6 billion from taxpayers.

  Once the checks from Treasury clear, Fan and Fred will have consumed a combined $145 billion in taxpayer cash, and the end is nowhere in sight. Both companies warned of further losses triggering more government assistance, which is now unlimited after a 2009 Treasury decision.

  The losses are unlimited because the companies are now run by the government not to make money, by deliberately subsidizing housing. In yesterday's press release, CEO Mike Williams didn't even pretend that he's running a profit-making business. "In the first quarter we continued to serve as a leading source of liquidity to the mortgage market, and we made solid progress in our ongoing efforts to keep people in their homes," he said. These efforts to support the Obama anti-foreclosure program resulted in a doubling of loan modifications compared to the previous quarter.

  Ramping up modifications makes perfect sense in the upside-down world of Fannie Mae. The company also announced that most of the loans it modified in the first three quarters of 2009 had gone delinquent again within six months. Talk about an exciting business opportunity! In case anyone still hasn't gotten the joke, the company also clarified yesterday that its directors "are not obligated to consider the interests of the company" unless the government tells them to do so.

  The real joke is that the Obama Administration and Senator Chris Dodd have collaborated on a financial regulatory-reform bill that includes no reform of Fan or Fred. Senators should rectify this embarrassment as early as today by voting for John McCain's amendment to end this most costly of all bailouts.

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