Fallout: The Financial Crisis

Fannie Mae seeks its federal lifeline

Dan Grech Feb 27, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

Fannie Mae seeks its federal lifeline

Dan Grech Feb 27, 2009
HTML EMBED:
COPY

TEXT OF STORY

Renita Jablonski: It looks like Uncle Sam is just about to close the deal to up the taxpayer stake in Citigroup. Reports this morning say the government would switch some of its preferred shares in Citigroup to common shares. But, this would only happen if the bank can convince private investors to do the same. The government’s stake in Citigroup could end up being as much as 40 percent. Sources say the deal also requires the bank to agree to conditions like switching up its board of directors. The government poured $45 billion into Citigroup last year.

At the same time, Fannie Mae is looking for its handout. The government-backed mortgage company reported yesterday it lost nearly $60 billion last year. Now for the first time, Fannie is tapping its federal line of credit. Marketplace’s Dan Grech reports.


Dan Grech: Fannie Mae says it needs $15 billion in federal aid to stay afloat. And that’s likely just the beginning. Fannie is expecting home prices to drop 12 to 18 percent in 2009.

Fannie Mae and its brother, Freddie Mac, own or guarantee more than half of all U.S. mortgages. And Freddie is in worse shape. It borrowed $14 billion last year, and expects to tap $35 billion more.

The money is there. The feds have set aside a $200 billion lifeline for each company to guarantee they would never fail.

Fannie Mae has seen six straight quarters of losses. Its liabilities now exceeds its assets. To borrow a term from real estate, Fannie is upside-down, meaning it’s worth less than nothing.

I’m Dan Grech for Marketplace

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.