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business newsFannie, Freddie Losses Rise Under Market Radar
By
Richard Suttmeier
May 11, 2010 9:00 am
The GSEs are following through as the largest cost to taxpayers of all the bailout programs.
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Editor's Note: This article was written by Richard Suttmeier, chief market strategist at ValuEngine.com, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.
Fannie Mae (FNM) and Freddie Mac (FRE) continue to drain taxpayer money as the Treasury provides unlimited lines of credit through 2012. Last week Freddie asked for $10.6 billion and on Monday Fannie asked for $8.4 billion. This brings the total bailout of the GSEs to $144.9 billion.
I've been predicting that conservatorship of Fannie and Freddie will be the largest cost to taxpayers of all the financial bailout programs, and that will prove to be the case as the GSEs will have unlimited access to the Senior Preferred Program though 2012.
Through the third quarter of 2009, Fannie Mae had tapped its $200 billion line of credit for $60 billion, leaving $140 billion. Its final line at the end of 2012 will be $140 billion plus the losses for the 13 quarters ending with the fourth quarter of 2012.
Freddie Mac tapped its $200 billion line of credit for $51 billion, leaving it with $149 billion plus all losses through the fourth quarter of 2012.
This makes the total line for the two GSEs $289 billion at the end of the third quarter of 2009. Since then the two have tapped the US taxpayer for another $33.9 for the fourth quarter of 2009 and first quarter of 2010 ($23.3 billion for Fannie and $19.6 billion for Freddie). Their lines of credit are thus $163.3 billion for Fannie and $159.6 for Freddie with 11 quarters of losses still to be added in.
Under conservatorship both Fannie and Freddie were to begin to unwind their mortgage portfolios by 10% per year in 2010 to achieve a $250 billion maximum by 2021. That’s still the case but the beginning threshold was raised to $900 billion each, which was the maximum that was not achieved by either at the end of 2009. Since both are at around $750 billion, portfolios can actually rise to $810 billion in 2010. This cushion will make it easier for the GSEs to stop buying mortgage-backed securities in 2011, and lessons the immediate need to be active sellers.
Risk Aversion Remains Intact Despite Euro TARP
The yield on the 10-Year remains richer than my semiannual pivot at 3.675 after testing 3.226 at its height last Thursday. My quarterly pivot provides a magnet at 3.467. Supply is tested today with the auction of $38 billion in new 3-Year notes.
Source: Thomson / Reuters
Comex Gold held my semiannual pivot at $1186.5, which is a key to the scenario calling gold “the currency of last resort.” My weekly pivot is $1206.7 with monthly resistances at $1217.3 and $1270.1. The euro rebound faded and early big gains couldn't alleviate an oversold condition.
Source: Thomson / Reuters
Nymex Crude Oil had a small bounce as my annual pivot at $77.05 provided a magnet. The lack of a bigger rally in crude oil questions the global growth story.
Source: Thomson / Reuters
The Major Equity Averages had one of their stronger rebounds in history, but the Dow, S&P 500, and the NASDAQ stayed shy of their 50-day simple moving averages at 10,845, 1171.50 and 2412, respectively. In Dow terms there are 1423 points between the February 5 low at 9,835 and the April 26 high at 11,258 in about 10 weeks. We fell from the high back close to that low in just eight days.
Source: Thomson / Reuters
Buzz & Banter: 30 professional traders sharing trading ideas in real-time. FREE 14 day trial.
Fannie Mae (FNM) and Freddie Mac (FRE) continue to drain taxpayer money as the Treasury provides unlimited lines of credit through 2012. Last week Freddie asked for $10.6 billion and on Monday Fannie asked for $8.4 billion. This brings the total bailout of the GSEs to $144.9 billion.
I've been predicting that conservatorship of Fannie and Freddie will be the largest cost to taxpayers of all the financial bailout programs, and that will prove to be the case as the GSEs will have unlimited access to the Senior Preferred Program though 2012.
Through the third quarter of 2009, Fannie Mae had tapped its $200 billion line of credit for $60 billion, leaving $140 billion. Its final line at the end of 2012 will be $140 billion plus the losses for the 13 quarters ending with the fourth quarter of 2012.Freddie Mac tapped its $200 billion line of credit for $51 billion, leaving it with $149 billion plus all losses through the fourth quarter of 2012.
This makes the total line for the two GSEs $289 billion at the end of the third quarter of 2009. Since then the two have tapped the US taxpayer for another $33.9 for the fourth quarter of 2009 and first quarter of 2010 ($23.3 billion for Fannie and $19.6 billion for Freddie). Their lines of credit are thus $163.3 billion for Fannie and $159.6 for Freddie with 11 quarters of losses still to be added in.
Under conservatorship both Fannie and Freddie were to begin to unwind their mortgage portfolios by 10% per year in 2010 to achieve a $250 billion maximum by 2021. That’s still the case but the beginning threshold was raised to $900 billion each, which was the maximum that was not achieved by either at the end of 2009. Since both are at around $750 billion, portfolios can actually rise to $810 billion in 2010. This cushion will make it easier for the GSEs to stop buying mortgage-backed securities in 2011, and lessons the immediate need to be active sellers.
Risk Aversion Remains Intact Despite Euro TARP
The yield on the 10-Year remains richer than my semiannual pivot at 3.675 after testing 3.226 at its height last Thursday. My quarterly pivot provides a magnet at 3.467. Supply is tested today with the auction of $38 billion in new 3-Year notes.
Source: Thomson / Reuters
Comex Gold held my semiannual pivot at $1186.5, which is a key to the scenario calling gold “the currency of last resort.” My weekly pivot is $1206.7 with monthly resistances at $1217.3 and $1270.1. The euro rebound faded and early big gains couldn't alleviate an oversold condition.
Source: Thomson / Reuters
Nymex Crude Oil had a small bounce as my annual pivot at $77.05 provided a magnet. The lack of a bigger rally in crude oil questions the global growth story.
Source: Thomson / Reuters
The Major Equity Averages had one of their stronger rebounds in history, but the Dow, S&P 500, and the NASDAQ stayed shy of their 50-day simple moving averages at 10,845, 1171.50 and 2412, respectively. In Dow terms there are 1423 points between the February 5 low at 9,835 and the April 26 high at 11,258 in about 10 weeks. We fell from the high back close to that low in just eight days.
Source: Thomson / Reuters
Buzz & Banter: 30 professional traders sharing trading ideas in real-time. FREE 14 day trial.
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