The New York Times has posted an article about the current financial states of Fannie Mae, The American International Group, GMAC and Freddie Mac. Despite receiving massive amounts of money in government bailouts, the companies are still not able to begin to repay the debt. Actually, it looks like they will probably will be given more taxpayer money “from the government just to keep up with their existing government debts.”
Though the four are not in all the same businesses, they were caught in one of the same traps: They sold mortgage guarantees – in some cases to each other. Now when homeowners default, as they are doing in record numbers, these companies are covering the losses. Essentially, taxpayer money to these companies is being used partly to protect banks and other investors who own the mortgages.
Fannie Mae and Freddie Mac, which buy and resell mortgages, will likely receive another $400 billion this year from the Treasury. Together, the two companies have used $112 billion. GMAC, which finances auto sales, was already given $13.4 billion and is in negotiations for another $5.6 billion “because a government “stress test” showed it was still too weak.”
A.I.G., the insurance conglomerate, recently drew $2 billion from a special $30 billion government facility, which was created in the spring after a $40 billion infusion proved inadequate.
Altogether, the four companies have been given or have been promised a total of $600 billion… and it may climb up to $1 trillion if the government doubles its Freddie Mac and Fannie Mae support.
A spokeswoman said that Freddie Mac and GMAC have made all their scheduled payments to the Treasury. A spokeswoman for AIG has said that repaying the taxpayers will be difficult and depend on the market. Fannie Mae also said it will have trouble repaying the Treasury.
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