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Business

Fannie Mae posts $15 billion loss and asks for $10.7 billion bailout

Text by NEWS WIRES

Latest update : 2009-08-07

Ailing state-backed mortgage firm Fannie Mae has posted a massive $14.8 billion loss in the second quarter, and has asked the US Treasury for a further $10.7 billion government bailout.

AFP - Troubled state-backed mortgage firm Fannie Mae took a massive 14.8-billion-dollar loss in the second quarter, and asked the US Treasury for another 10.7 billion dollars in aid, the company said Thursday.
   
Fannie Mae and its fellow state-backed lender Freddie Mac have already received hundreds of billions of dollars as part of a virtual government takeover aimed at avoiding their collapse in the wake of the subprime mortgage crisis.
   
"Second-quarter results were driven primarily by 18.8 billion dollars of credit-related expenses, reflecting the ongoing impact of adverse conditions in the housing market, as well as the economic recession and rising unemployment. Credit-related expenses were partially offset by fair value gains," the company said.
   
"The company also reported a substantial decrease in impairment losses on investment securities, which was due in part to the adoption of new accounting guidance."
   
The latest decrease for Fannie Mae came on the heels of a 23.2-billion-dollar loss in the first quarter.
   
"Taking into account unrealized gains on available-for-sale securities during the second quarter and an adjustment to our deferred tax assets due to the new accounting guidance, the loss resulted in a net worth deficit of 10.6 billion dollars as of June 30, 2009," the company said in a statement.
   
As a result, it said the head of its conservator, the FederaL Housing Finance Agency, submitted a 10.7-billion-dollar request from the Treasury "in order to eliminate our net worth deficit" on or before September 30.
   
The Washington Post reported Wednesday that the US government could split Fannie Mae and Freddie Mac and place the firms' toxic assets in a federal corporation.
   
Such a deal could allow the financial giants, long lynchpins of the US housing market, to move forward unconstrained by troubled assets -- easing still constricted credit markets with the hope of driving consumer spending, the report said. Together, the two firms back 40 percent of all US home loans.
   
White House spokesman Robert Gibbs insisted that the report was "light years ahead of any decision-making process here.
   
"There's no meeting that's scheduled," he said. "And safe to say that many senior administration economic officials learned of this proposal sometime this morning at the foot of their driveway."
   
Staff "are aware of the problem and working on it as a part of financial regulatory reform," Gibbs added.
   
However, he cautioned, assuming "that either this is at a point of even a decision by senior economic officials, let alone anybody that occupies the Oval Office, is way, way, way ahead of itself."
   
 

Date created : 2009-08-07

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