Fannie Mae and Freddie Mac are unlikely to repay the $85 billion in government assistance they received as part of the bailout program, the agencies' top regulator said Thursday.
"Their book is so large," James Lockhart, director of the Federal Housing Finance Agency, told the National Press Club. "It's hard for me to see that they will be able to repay all of that."
Lockhart said that, contrary to the behavior of financial firms that have eagerly sought to repay bailout money, Fannie Mae and Freddie Mac were likely to need further financial assistance in the future.
Lockhart's comments were reported by numerous news outlets.
The two agencies, which are regulated by the federal government but expected to meet expenses without taxpayer assistance, guarantee home loans. Both suffered major losses connected to the collapse of the real estate market, and some critics have criticized them for loose lending practices that inflated prices.
When the government offered to bail out the agencies, some argued that the transactions - which paid 10 percent interest -- could be profitable for taxpayers. Lockhart's remarks, however, cast serious doubt on whether the agencies will be able to repay the initial capital investment at all.
"Unfortunately, I guess we have to look at it as an investment by the taxpayer to stabilize the mortgage market," Lockhart later told Bloomberg Television.
Fannie Mae and Freddie Mac together have posted losses of $150 billion since the third quarter of 2007. Lockhart said he expects they will continue to lose money
"for at least the next year or so" and are unlikely to book "strong profits" for another two to three years. In the meantime, the government will likely have to provide additional financial assistance, he said.
"Their book is so large," James Lockhart, director of the Federal Housing Finance Agency, told the National Press Club. "It's hard for me to see that they will be able to repay all of that."
Lockhart said that, contrary to the behavior of financial firms that have eagerly sought to repay bailout money, Fannie Mae and Freddie Mac were likely to need further financial assistance in the future.
Lockhart's comments were reported by numerous news outlets.
The two agencies, which are regulated by the federal government but expected to meet expenses without taxpayer assistance, guarantee home loans. Both suffered major losses connected to the collapse of the real estate market, and some critics have criticized them for loose lending practices that inflated prices.
When the government offered to bail out the agencies, some argued that the transactions - which paid 10 percent interest -- could be profitable for taxpayers. Lockhart's remarks, however, cast serious doubt on whether the agencies will be able to repay the initial capital investment at all.
"Unfortunately, I guess we have to look at it as an investment by the taxpayer to stabilize the mortgage market," Lockhart later told Bloomberg Television.
Fannie Mae and Freddie Mac together have posted losses of $150 billion since the third quarter of 2007. Lockhart said he expects they will continue to lose money
"for at least the next year or so" and are unlikely to book "strong profits" for another two to three years. In the meantime, the government will likely have to provide additional financial assistance, he said.
published July 31, 2009, 0 Comments
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