Fannie & Freddie: Why Should You Care?

Fannie Mae reported a loss of $25.2 billion for the fourth quarter of 2008 (losses of $58.7 billion for full-year 2008). Total nonperforming loans were $119.2 billion at year-end. Fannie is requesting additional capital from the U.S Treasury. The other gargantuan government-sponsored enterprise, Freddie Mac is likewise running up billions of dollars in losses. Freddie is preparing to ask for additional capital from the U.S Treasury of $35 billion.

Why should you, the taxpayer, be concerned? Isn't the Federal government using bailout funds allocated by Congress to clean up the mess?

The problem is the Federal government is on the brink of bankruptcy itself. The U.S. government is $11 trillion dollars in debt. (That figure does not include tens of trillions of dollars of off-balance sheet, unfunded liabilities.) Congress has no "money to allocate" to Fannie, Freddie, or anything else. You, the taxpayer, are on the hook for these massive obligations.

A recap of the origin of Fannie and Freddie and their role in the financial mess. The media is casting Bernie Madoff as the evil-doer but his antics were small-time larceny compared to the Fed and Congress and their many turfdoms, including Fannie and Freddie.