fannie mae and freddie mac Twice as Effective & Twice as Sovereign: Fannie / Freddie Backstop Swells 100% to $400 billion

fannie mae and freddie mac "Resetting these agreements from $100 to $200 billion each should remove any possible concerns debt and mortgage-backed securities investors have about the strong commitment of the U.S. Government to support Fannie Mae and Freddie Mac," said James Lockhart, director of the Federal Housing Finance Agency, which oversees the companies [in remarks earlier today]. [1]

… expliciter and expliciter …

Earlier today it was reported that Obama’s big housing bailout quietly doubled government support to the already quasi-nationalized mortgage finance giants Fannie Mae and Freddie Mac. Not only that, but this report [2] asserts that "… the [new] plan extended the government’s line of credit with the GSE’s and enabled Treasury to take an equity stake in the firms."

Doomers should re-read this earlier Doom post detailing Bush protege Lockhart’s earlier adventures with the infamous "effect guarantee" on the GSE Agency Debt. The bottom line is that agencies today took a giant step towards achieving the status of officially acknowledged Sovereign Obligations of the United States of America. Put another way, it’s beginning to look like the OMB will soon have to double its number for America’s national debt.

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[1]: "Government Doubles Available Aid to Fannie and Freddie", by Binyamin Appelbaum, Washington Post, February 18, 2009.

Fannie Mae and Freddie Mac were seized by the government in September to stabilize their role as the main source of funding for the mortgage lending industry. The government pledged up to $200 billion to cover the companies’ losses, but officials said at the time they did not expect the companies to need that much help.




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