Weren’t those companies zombies? No, wait…THEY’RE ALIVE!

by pdxblake

I probably won’t have time to go through the whole report (I can’t say no to more work), but here’s the details via Calculated Risk on the former money pits called Freddie and Fannie:

“The Federal Housing Finance Agency, the companies’ federal regulator, released a report on Friday that estimated they will pay between $32 billion and $78 billion to the U.S. Treasury through 2015. The baseline forecast assumes that the companies would end up costing taxpayers $76 billion by the end of 2015, down from the current tab of $142 billion.

The regulator’s latest forecasts show that Freddie Mac won’t require additional government support, even under a “worst case” scenario that envisions further home-price declines.”

Freddie and Fannie were expected to be sucking money from the US Treasury for a while due to house price declines. However, that is coming to an end as the housing market finally begins to rebound.

Combined with the rebound of AIG (ht Felix Salmon with a very complicated, confusing post), the government’s most troubled investments from the financial crisis are doing pretty well and actually returning money to the Treasury (through dividends from Freddie and Fannie and previous sales of stock in AIG).

These statements are remarkable when you remember that AIG was viewed not too long ago as a ‘zero’, an investment with the likelihood of being worth nothing as a result of the toxic assets it held. And Freddie and Fannie were viewed as worse than zero, since the government was expected to have to keep pumping money in to keep them alive and solvent.

Now, before you accuse me of being a total Obama booster (the stimulus stopped the slide, and the turning point was probably delayed by Republican obstructionism), I will give credit to the Bush Administration (I feel dirty) for going against what was probably their immediate instinct of ‘keep the government out of the financial sector’ and stepping in to prevent a catastrophic collapse.

Now, if only Freddie and Fannie could actually start improving their own situation by offering principal reduction to some mortgagees. But that would take firing the current head Ed DeMarco.  Oh, wait.