JUST ASKING: ARE THE DEMOCRATS LOOTING FANNIE MAE AND FREDDIE MAC FOR UNALLOCATED FUNDING FOR SPECIAL PROJECTS?
Just asking ... While finishing up some professional work involving the reporting of Fannie Mae and Freddie Mac’s third quarter financials, I am struck by a curiosity.
Either it is an innocent shell game – manipulating billions in balance sheet accounts or it might be more serious, like the democrats obtaining unallocated funds for special projects.
What I found …
Both firms are on the brink of insolvency and require federal funding to keep afloat. Nothing new here about their condition which forced both of them, Fannie Mae and Freddie Mac, into a federal conservatorship.
But what is curious is why they continue to report up-streaming quarterly dividend payments to the Treasury Department when they could easily ameliorate their own liquidity problems.
Fannie Mae is reporting a net worth deficit of $2.4 billion at the end of the third quarter while up-streaming its quarterly payment of $2.1 billion to the Treasury. To cover the shortfall, they are requesting through their regulatory oversight agency, the Federal Housing Finance Administration, $2.5 billion from the Treasury.
Freddie Mac is reporting a net worth deficit of $58 million at the end of the third quarter while up-streaming $1.6 billion in dividends to the Treasury. To cover the shortfall, they are requesting through their regulatory oversight agency, the Federal Housing Finance Administration, $100 million from the Treasury.
Why are they required to pay dividends to the Treasury when they could ease their own liquidity problems on their own.
In Fannie Mae’s case, they could have retained the $2.1 billion in dividends and dipped into the Treasury for only $300 million and change to keep the game afloat.
In Freddie Mac’s case, they could have retained the $1.6 billion in dividends and not called upon the Treasury Department for any money.
Bottom line …
Why does the United States Department of Treasury need to collect quarterly dividends from the Government Sponsored Enterprises, Fannie Mae and Freddie Mac, and then turn around and given them additional funds from the Treasury?
What does Tim Geithner’s Treasury Department do with the dividends?
Pass them along to other financial institutions to help them maintain their solvency?
Fund additional democrat-driven social projects to curry political favor in the next election cycle?
Are these funds part of some contractual agreement which, if breached, would bring about catastrophic consequences to the GSEs?
Or is the transfer of money to-and-fro simply an electronic bookkeeping exercise to disguise the real numbers and condition of the GSEs?
Anyone out there have a solid explanation of why they engage in this type of bookkeeping and what they might actually do with the up-streamed dividends?
Reference Links …
More information on Fannie Mae can be found at http://www.fanniemae.com/media/pdf/newsreleases/q32010_release.pdf.
More information on Freddie Mac can be found at http://www.freddiemac.com/news/archives/investors/2010/2010er-3q10.html.
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