Fannie Mae may fall more, need bailout - Barron's

[UpInArms]

Source: Reuters

NEW YORK, March 9 (Reuters) - Fannie Mae (FNM.N: Quote, Profile, Research), the largest U.S. home funding company, could face further declines in its already battered share price, and may soon need a government bailout, according to the latest issue of Barron's.

Shares of the government-sponsored enterprise have fallen 65 percent since last fall, amid a worsening U.S. housing crisis sparked by widespread availability of so-called subprime mortgages to borrowers with weak credit.

Barron's said the company, which lost $2.6 billion last year, has a balance sheet that appears loaded with "iffy" assets and understated liabilities that could leave the company ill-equipped to weather a serious financial crisis.

Although the government would likely bail the company out in such a scenario, by honoring its debt and obligations, Fannie Mae shareholders "would likely suffer grievously in such a scenario," the article said.

Read more: http://www.reuters.com/article/bondsNews/idUSN0940501220080309

[Deja Q]

1. Somebody else will just buy out Fannie and subsequently save her fanny.

BoA recently bought out a failing entity...

The state of Minnesota has helped Northwest quite a few times -- Delta is buying them, it seems...

Tax incentives, breaks, and other goodies... not to mention existing subsidies, of that I'll admit I have no proof...

Will the homeowners get any help?

[sarcasmo]

2. No Bailouts for Corporate WHORES!

[Zynx]

5. If Fannie goes under, we all could be in serious trouble.

The same goes for major banks.

[sarcasmo]

8. So your saying a bailout is A, OK?

[Zynx]

10. Yes, yes I am.

Under certain circumstances the lesser of two evils must be accepted. The government can put conditions on the bailout including requesting current management resign.

[sarcasmo]

14. Would the Government bail you out? I think not.

[fascisthunter]

15. BS... It's Time We Sever Whatever Tie There Might Be

The idea that a corporation's demise is also ours needs to be rectified. No more fascism... and break up all monopolies.

[UALRBSofL]

13. Agree, no bailout

If you can't help the people and bail them out then they sure as hell shouldn't bail out corporations.

[Barrett808]

3. rec n/t

[defendandprotect]

4. No government bail-outs for corporations ---

This mess has been ignored for three or more years ---

[DianeG5385]

6. It's actually a quasi-governmental enterprise (GSE)

So in a sense, the gov't has to bail it out, since the gov't changed the rules and allowed them to buy some of the bad loans.

[defendandprotect]

7. As I understand it, it was reformed and mostly privatized . . .

...but I don't think we "have to" bail anyone out ---

and if you have mismanagement to this extent, it should be taken over by government ---

[Robbien]

9. Fannie defaulting. Truely scary stuff

And its financial reports are all just smoke and mirrors

Fannie reports a net worth of $45.4B, $3.9B more than its minimum capital requirement of $41.5B. BUT, $13B of that are deferred tax credits that only have value if the company earns enough money to trigger them -- an unlikely scenario. Barron's notes that if Fannie were a bank, none of the $13B would be allowed on its balance sheet. Another $8.1B of its net worth is from Lower Income Housing Tax Credit partnerships, which are also likely to expire worthless. That leaves $45.4 - $13 - $8.1 = $24.3B.

Looking at its liabilities, Fannie tells regulators it will have to pay out $15.4B in guarantees on its $2.4T guaranty book. Yet on its "fair value" balance sheet, the guarantees are estimated at $20.4B. What's worse, Fannie's estimates assume guaranty payments of just 0.74% of the portfolio, where smaller rival Freddie pegs its payouts at 1.5% -- and Freddie has a lower delinquency rate than Fannie. Also, in Q4 the firm wrote down its $74B of non-agency subprime and Alt-A mortgages by just 6% ($4.6B), of which its says only $1.4B is permanent. Most major banks (MER, UBS) wrote down much higher percentages on similar paper, with no qualifiers. Using conservative default rates, Barron's says Fannie could be hit by cumulative credit losses of over $50B.

above analysis by
http://seekingalpha.com/article/67748-fannie-may-fail-barron-s

Fannie wrote down at-risk mortgages by only 6%? Over half of Fannie's net assets are unused and unearned credits which are expected to expire unused?

Yup, Fannie is defaulting. Scary stuff.

[Heywood J]

12. Is anybody making book on when this is going to happen?

Seriously, I'd be surprised if there wasn't.

[Zorra]

11. Bailout? Why, they need to get to work and pick themselves up by their bootstraps.

No welfare here. This is America. When I was a little girl I lived in a deep pothole in the road and had to walk 20 miles through the snow with no shoes on just to get to school, and I counted myself as lucky.

Why should I give my all the money I inherited or later stole through corrupt financial practices to a bunch of lazy losers that just want to sponge off others?

These loafers need to remember: "The Lord helps those that help themselves".

If they can't make it on their own they need to either get to work 24/7 or else roll over and die and not be a burden on society, like any good christian American should when devastating financial catastrophe strikes.

It's the Republican Way.
:patriot:

[Buns_of_Fire]

17. Damn straight! Free-market, unrestrained and unregulated capitalism ALL THE WAY!

By the way, you forgot to add that your 20-mile trek to school was uphill. Both ways. Like mine was. And I had to fight off vicious pumas every block or so and the reason I was barefoot was because I ate the last morsel of my shoes for breakfast.

And we liked it that way!

;)

[fascisthunter]

16. Fascism... tax payers are paying for the wealthy

to live a life of leisure while they pay us peanuts.... fuck them all.

[ozone_man]

18. No more bailouts for Wall Street shysters.

They gambled with risky investments, they lost. We should not have to pay for their mistakes.