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Fannie Mae / Freddie Mac Bailout Cost to Reach $224 Billion



The total taxpayer bill for bailing out mortgage giants Fannie Mae and Freddie Mac is expected to reach $224 billion by the end of 2012, according to President Obama's 2012 budget, which he sent to Congress Tuesday. Of that total, $55 billion will reportedly be returned to the US Treasury via dividends.

By 2013, the budget said, the two government-run entities should be profitable enough to "pay part, but not all" of their dividend payments from earnings. The budget's estimated cost of the bailout, $169 billion after the dividend payments, lies at the lower end of a range of estimates supplied by the Federal Housing Finance Agency, the regulator charged with overseeing Fannie and Freddie since they were taken over in 2008.

FHFA's estimates range from a best-case scenario of $221 billion in total costs for the bailout, or $142 billion after dividends, to a worst-case of $363 billion, $259 billion after dividends. Fannie Mae and Freddie Mac, which together own or guarantee over half of US residential mortgages, were seized in 2008 with the promise of unlimited aid to counter their losses from subprime mortgage debt. As part of the conservatorship, the government received close to 80 percent of the companies' preferred shares which accrue dividends of 10 percent annually, payable to the US Treasury.

The 2012 budget does not account for Fannie and Freddie's debt and obligations, which come to a staggering $5.3 trillion, or more than the total of $3.7 trillion in the budget. Since being seized, Fannie and Freddie's losses have narrowed, and more and more of their aid funds have been used to make dividend payments to Treasury.

February 17, 2011



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