Thursday, December 24, 2009

Merry Christmas... Suckers!

Sadly, Obama used this Christmas eve to announce there will be no limits to the amount of taxpayer subsidy to support Fannie Mae and Freddie Mac.[1,2] When the program was instituted in September 2008 under Bush, bailout limits were set to $200B. Obama then doubled limits to $400B, and today he announced no limits.

Effectively, banks can shift toxic loans on to the tax base by selling them to Fannie Mae and Freddie Mac. With the government buying, likely worthless mortgage securities will be bought at full price. This amounts to very generous support of Wall Street courtesy of taxpayers. Reportedly, so far $110B of mortgage securities have been picked up, so this pre-emptive expansion of government support seems a little enthusiastic.

Also, the CEOs of these two failed government-run programs are once again eligible for bonuses of up to $6M.[3]

1. U.S. Promises Unlimited Financial Assistance to FNM, FMC.
2. U.S. Move to cover Fannie, Freddie Losses Stirs Controversy.
2. Regulators Approve Millions for Fannie, Freddie Execs.

1 comment:

East.Bay.Miser said...

I was stupefied and the Fox News folks were apopletic.