Image by futureatlas.com via FlickrBut Fannie is the darling of the mortgage industry. She symbolizes an era of free money. Why sweat it when the taxpayer is there to supply more money to cover the losses. It is time for Fannie Mae to go. If we have to force her into bankruptcy so be it. The money that the American taxpayers are tossing at Fannie could be put to better use. For example, let's use the money to create more jobs. Or let's invest in a better healthcare system.
The third quarter loss for Fannie Mae was $1.3 billion. Part of the money requested will be used to pay a dividend of $2.1 billion. On the stock market (OTC) Fannie Mae is trading at $0.3874. Fannie Mae has drawn $88.6 billion from the Treasury, including the $2.5 billion that is now being requested.
The timing for Fannie Mae is just wrong. Fannie is having trouble selling the inventory that it is still holding at a time when the value of the repossessed homes is plummeting. In addition, there are mounting credit losses due to the stall in foreclosures. As of September 30, 2010, Fannie has 166,787 houses in inventory. This figure is up from 129,310 in the second quarter.
One way to help Fannie Mae is to have the banks buy back some of the bad loans. Fannie recorded $1.6 billion in repurchases last quarter. However, this is a drop in the bucket when we consider that there is $7.7 billion in outstanding questionable loans from the banks.
Instead of giving Fannie Mae more money, it would be a better idea to pressure the banks to pay up.
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