Ninety Six Billion (and counting)

by Russ Roberts on August 7, 2009

The mounting price tag for the rescue of Fannie and its goverment-sponsored sibling, Freddie Mac, is surpassed only by insurer American International Group Inc., which has received $182.5 billion in financial support from the government so far.

Fannie Mae’s new request for $10.7 billion from the Treasury Department will bring the total for Fannie and Freddie to nearly $96 billion. Freddie is expected to report its quarterly results on Friday.

The government has budgeted $400 billion for Fannie and Freddie’s losses. I wonder if it will be enough. If I understand the data correctly, the Fed bought about $600 billion of Fannie and Freddie’s assets. Wonder what they will ultiamtely be worth.

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martinbrock

While you're investigating bailout mania for your magnum opus, don't forget state employee pension funds.

jorod

What is the present value of those securities? You need to know the cash flow behind them...

Methinks

Correction - you need to be able to estimate the cash flows to come. Since the government keeps piling money into the GSEs to cover losses, my guess is those cash flows are probably worth a lot less than the Fed paid for them.

Methinks

Really? Can the world tolerate more than one Methinks?

BTW, this will be chump change compared to how much is needed to bail out Fannie Med - if that should come to pass (God forbid and call your representatives NOW. Love, Astroturf).

surfisto in Chile

d

vikingvista

I ran some numbers. Looks like conservative assumptions are that it will be worth...butkis, and some change. Plus or minus.

surfisto in Chile

Vikingvista,
What numbers did you run? I understand Freddie Mac to have taken 50 billion or so. This past quarter they paid the gov't a 1 billion dividend at this rate the 50 billion will be paid off in 12.5 years. There balance sheets shows close to 1 trillion in long term debt, not sure how much of that is "toxic" or worth nothing.

Yet Another Methinks

96 Gigabuck

Government will now need another smoke screen to cover up the enormous loss numbers. Poor will need to cough up more anti-employment tax deposits to FICA. Retirees will need to endure more inflation to pay for public debt. But if we can allay suspicions with a trade in. Would you believe a 14 mpg truck exchanged for your old clunker in even trade + factory rebate check subsidized by the Social Security Lock Box?

Happy Motoring☺