Mortgage finance giant Freddie Mac (FRE) said Wednesday it needs more taxpayer funds after posting a $6.69 billion loss in Q1. The latest request will push total government aid to Freddie and sister firm Fannie Mae (FNM), both under gov't conservatorship, to $136.5 billion.
Freddie said it expects to ask for more taxpayer funds as the red ink continues to flow. And why not? The Treasury late last year essentially wrote the two quasi-public firms a blank check for future losses.
Freddie and Fannie helped finance the massive explosion of subprime home loans. Because of their implicit (now explicit) government guarantees, they expanded and leveraged far beyond what truly private firms could get away with.
Rep. Barney Frank declared in 2003 he was willing to “roll the dice,' dismissing fears that Freddie and Fannie could suffer major losses and destabilize credit markets. Even after those Cassandras turned out to be right, Frank and his colleagues continue to ignore the problem: Democrats' sweeping financial overhaul bills somehow fail to address Fannie or Fannie at all.
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