Saturday, April 25, 2009

The Debts of the Spenders: FNM Postpones the Inevitable w/New Liar Loans

Gee. The more things change the more they stay the same.

I still don't see how this is going to solve unemployment or any other number of economic problems. The more govt intervention is mandated the longer the L curve of the recession (depression?) grows:

Faced with growing numbers of homeowners unable to make mortgage payments, Fannie decided to fund loans to borrowers that were instant losers.

The point was to buy time. Even though those loans resulted in a $453 million loss, they helped keep troubled homeowners from defaulting. That meant Fannie for now didn’t have to make good on loan guarantees that may have cost it as much as $2.4 billion.

That’s sure to lead to nasty surprises down the road at individual banks. It also promises to lengthen the economic slump by preventing markets from finding natural bottoms that allow excess inventory to be sold.

Fannie’s program shows how potentially big losses are still festering within the system, unbeknownst to investors.



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