Thursday, May 15, 2008

Freddie Mac's losses--worse than they look

Charles Duhigg has a good explanation in today's New York Times. The really scary part is that the company's capital has been reduced to about $16 billion, which puts it at a 50-to-one leverage ratio. They need to raise capital now--I am guessing they will find their common stock offering to be expensive for their current shareholders.


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Anonymous said...

Fannie just announced that they were reducing down payment requirements in response to lobbying pressure. Good luck with that.

Homes in many areas are just too expensive for the median person to afford. Creative financing won't solve the problem, just create another one. The question comes down to how much extra taxes are the rest of the nation willing to pay to subsidize over zoned area prices?

The GSEs will eventually require a taxpayer bailout if they are pressured to take on even more loans with little chance of being paid back.

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