By Sean Goldsmith in the S&A Digest:
Government-controlled mortgage lender Fannie Mae announced an $18.9 billion third-quarter loss – bringing total losses in the past eight quarters to $101.6 billion. Luckily, the Treasury Department stands ready with $200 billion of taxpayer money to bail this miserable company out. Fannie is asking for an additional $15 billion in emergency funds – its fourth "withdrawal" this year – upping its total bailout cost to $60 billion... so far.
But Fannie will never earn its way out of this mess... If the company actually turned a profit, the $6.1 billion in annual dividends it owes the government would eat it all... And Fannie has only earned more than $6.1 billion twice in the past 20 years ('03 and '05). So of course, Fannie is "dependent on the continued support of the Treasury to continue operating," according to its latest statement.
And the cash hemorrhage is only getting worse. Fannie's nonperforming loans rose to $198.3 billion this quarter, up from $171 billion on June 30, 2009, and $119.2 billion on December 31, 2008. In other words, bad loans have almost doubled in less than a year. And foreclosed property on Fannie's books stands at $7.3 billion compared to $6.2 billion on June 30, 2009. Take a look at this chart (borrowed from Whitney Tilson's housing presentation) showing the acceleration in Fannie and Freddie mortgage defaults:
With unemployment hitting a 26-year high of 10.2% (the economy shed 190,000 jobs), the chance of these nonperforming loans becoming active again is slim.
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More from the Digest:
These stocks will get clobbered in the next leg down
This tiny company could be the next Berkshire Hathaway
Stansberry: Detroit's socialist nightmare is America's future
