Fannie and Freddie's Unlimited Bailout: Bad Bank of Housing?
The Fed knows damn well it can't buy MBSs forever. Good thing we've got a Plan B for that unlimited GSE bailout eh?
The government's decision to provide unlimited support to Fannie Mae and Freddie Mac probably presages more aggressive action to prop up the U.S. housing market.
The government may put a mortgage-modification effort, called the Home Affordable Modification Program, or HAMP, into overdrive in coming years, pushing for reductions in the principal outstanding on home loans overseen by Fannie (FNM 1.25, +0.20, +19.05%) and Freddie (FRE 1.57, +0.31, +24.60%) , Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors Monday.
The U.S. Treasury Department said on Christmas Eve that it lifted $200 billion caps on the amount of taxpayer money that can be pumped into the ailing mortgage giants over the next three years.
Neither institution is near its $200 billion limit -- Treasury has put $60 billion into Fannie and $51 billion into Freddie since it seized the failing companies in September 2008.
See also my Christmas Day Timmy Hopes You Won't See That He Just Gave Fannie and Freddie an Unlimited Bailout for Christmas. Good times, kids, good times.