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Kai Ryssdal: For the fourth consecutive quarter — that’s more than a year, just to make the point — Freddie Mac is deep in the red ink: $842 million dollars worth, three times as bad as even the pessimists had been guessing.
With no sure sign the housing market’s hit bottom yet, we asked Marketplace’s Alisa Roth to find out what might happen next for the government-backed mortgage giant.
Alisa Roth: Freddie Mac has lost more than $4.5 billion so far this year. The CEO’s proposed solution: Raise $5.5 billion from investors.
Chris Mayer studies real estate at Columbia. He says that could be tough, at least until the housing market sorts itself out and investors can see which way Freddie Mac is going.
Chris Mayer: Either things continue to get worse and their losses get the point where they’re really going to have to go to the government for some type of assistance or things turn out to be better so that people start to believe that the losses aren’t going to make them insolvent.
Mayer says that $5.5 billion Freddie Mac plans to raise is key. The longer the company goes without the cash, the uglier things will be.
Karen Shaw Petrou is with Federal Financial Analytics. She says Freddie Mac will be around when it’s all over. The question is how.
Karen Shaw Petrou: Whether it maintains its GSE status as a publicly-backed, privately-owned company is the question or instead, would it be turned into a receivership, in essence, will it be restructured?
She says Freddie Mac can’t disappear altogether. The company was created nearly 40 years ago to help ordinary Americans buy homes. The law that spawned the company also guarantees it’ll always exist in some form.
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