Fanie and Freddie ask for more!

[AFTiger 282]

Dear Senator Shelby:

Since you have voted to make a tax cheat the Treasury Secretary, I suppose another $41 billion to corrupt organizations makes perfect sense.

Fannie to Tap U.S. for as Much as $16 Billion in Aid (Update2)

By Dawn Kopecki

Jan. 26 (Bloomberg) -- Fannie Mae, the largest source of home-loan money in the U.S., said it will need to tap as much as $16 billion in emergency funds from the U.S. Treasury Department to stay afloat as deterioration in the housing market persists.

Fannie’s planned request, announced today, follows Freddie Mac, which said Jan. 23 that it will need as much as $35 billion more in federal aid. Unprecedented mortgage losses drove the net worth of both companies below zero last quarter, they said in separate securities filings.

This will be Washington-based Fannie’s first draw on a $200 billion emergency fund set up by Treasury in September to keep the government-sponsored enterprises solvent. Fannie said losses on mortgage loans and a decline in the market value of its assets accounted for the shortfall in the fourth quarter.

Fannie’s Treasury request was “much worse” than expected, said Rajiv Setia, a fixed-income strategist at Barclays Capital in New York. Setia estimates taxpayers will have to shell out at least $50 billion for Fannie and $70 billion for Freddie this year. One or both, especially Freddie, may exceed the Treasury’s backstop this year, he said.

The requests for funds comes as the Treasury faces increasing demands from U.S. financial companies such as Bank of America and Citigroup Inc., which are coping with the fallout from a slumping housing market and a deep recession that’s driving foreclosures to record levels.

Freddie and Fannie are the largest sources of mortgage money in the U.S., owning or guaranteeing a combined $5.2 trillion of the $12 trillion home-loan market.

Treasury Lifeline

McLean, Virginia-based Freddie, which received $13.8 billion in aid in November, will be using about half of its $100 billion lifeline from Treasury once it receives its second capital injection.

“Hopefully policymakers are proactive in upping the $100 billion backstop,” Setia said. “You don’t want them to get to those levels and have to revisit the issue.”

The companies have posted five consecutive quarters of losses totaling $68.4 billion combined. The Federal Housing Finance Administration seized their operations in September amid concern from regulators that the two may fail in the worst housing slump since the Great Depression.

Fannie has previously said that $100 billion may not be enough to keep it afloat. Treasury agreed to pump money into the companies if the value of their assets drops below what they owe on their obligations. Fannie’s $3.1 trillion total book of business was worth $9.4 billion at the end of the third quarter. Fannie’s preliminary request was $11 billion to $16 billion.

Stefanie Mullin, an FHFA spokeswoman, declined to comment.

To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.

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This has been posted twice but I didn't merge the two since the dims didn't see fit to respond in either thread. It's just more spending that is all good because the government will save us all by spending like there is no tomorrow.