Fannie Mae recently told us they need another $10.7 billion of taxpayer money, after already receiving about $34 billion . . . that fools like Carney Frank and Dudley Dodd told us would never be needed.
Freddie Mac headlines recently shouted out how great things are because they didn't lose money . . . if you excluded dividends they were required to pay. So in reality, they lost money. It's funny, how we crave reality when it comes to TV shows, but we don't want any part of it when it comes to our financial systems or our futures.
$2 Trillion Problem - Fannie and Freddie guarantee or own more than $2 trillion in mortgages, and that number is growing, as these two "stars" are the last resort in a housing market that is stumbling along like a drunken sailor on a short pier.
With the very best estimates putting more than 20% of all mortgages underwater, you can do some simply math and double that number to 40% or more for Fannie and Freddie.
Ground Zero - I'm at ground zero in my real estate brokerage, and we work with banks and foreclosures every day. We also work with home buyers, sellers and those that are just stuck. On average we are seeing banks recover about 35% of the mortgage value after foreclosing on properties and paying off the attorneys, asset managers, real estate agents, contractors and consultants. And believe me . . . I'm being generous with the 35%. In my market, Florida, the problem is much worse, with foreclosed homes now selling for less than the "lots" sold for four years ago. We are selling homes for $80,000 that were selling for $300,000 and were built on $90,000 lots!
This all means on $2 trillion in mortgages, there will be losses exceeding $1.3 trillion, which is more than enough to pay for Obama's health care plan, a fleet of jets for Congress, and a few hundred billion for Goldman Sachs' fees and Bankster Bonuses.
Head You Lose - Tails Goldman Sachs and JP Morgan Win - You don't think that $1.3 trillion will come from the tooth fairy, do you? Nope. If you're tuned into this Reality TV show, that $1.3 trillion will come from you, your kids and your grandchildren . . . and their kids and grandchildren. Goldman Sachs, JP Morgan and the other Banksters will be there on all sides of the collapse with derivative bets on the collapse and ready to scoop up choice morsels at below market prices and making huge fees from buyers, sellers and the government.
Geithner Sends Smoke Signals - If you think I'm making this stuff up, you need to put down the beer and chips, and pick up the newspaper. In fact, Tim the Tax Cheat just told us Fannie and Freddie are doomed to be broken up, when he appeared at the House Financial Services Committee hearing. But he made it sound like something good was going to come from this break up. Not so with James Lockhart . . .
James Lockhart, departing director of the Federal Housing Finance Agency, kinda, sorta, winkie-winkie told us our $85 billion was gone and it was going to cost a heapin' pile more to unwind these two kids. Actually, he only told us we were going to lose some of the $85 billion, but this guy has been lying through his teeth, toes and nose since he landed in Washington.
Good Bank - Bad Bank . . . The Sequel - It's back again, like Ground Hog day. You see, rehashing Good Bank - Bad Bank is nothing more than a pirated copy of Ground Hog day played on a black and white TV with the static. Each time we hear it, it gets worse. But here we are proposing to take the good assets from Fannie and Freddie and leaving the bad assets for "another" entity. First of all, that entity is you the taxpayer. Second, you can rest assured the good assets will go to friends and family of Goldman Sachs. Didn't you hear? That's been deemed an inalienable right during this financial crisis.
Sparks but No Kaboom - That's the big issue. Everyone keeps asking me, what will trigger the next leg down in the financial markets. What will trigger a meltdown? My response is anything from a natural disaster to a war or maybe the reality we are facing with a mortgage market that is one Reality TV scene away from total blackout.
By the way, the $1.3 trillion potential hit in the Fannie and Freddie debacle is probably only a quarter of the total residential and commercial loss that seems to be growing by the day.
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