With the signing of the housing “relief” act, the process has now officially begun in what will be not only the largest taxpayer bailout of private enterprise in history but the largest legislative blunder as well.
Allowing the Treasury Department of an immensely debt-laden country carte-blanche to utilize taxpayer money to engineer an essentially unaudited unwind of the GSEs, the two massive risk-laden failures, seems to smack of the essence of the times and further, at least in my mind, marks a decisive push into the absurd that would likely precede a wider scale collapse of our economic system.
Given the sheer size of these government sponsored companies, with loan guarantee obligations recently estimated by Federal Reserve Bank of St. Louis President William Poole of totaling $4.47 Trillion (That’s TRILLION with a capital T… for perspective ALL U.S. government debt held by the public totals roughly $4.87 Trillion) and the “fuzzy” interpretation of their “implied” overall Federal government guarantee should they experience systemic crisis, these changes are reckless to say the least.
The following chart (click for larger) shows what Fannie Mae terms the count of “Seriously Delinquent” loans as a percentage of all loans on their books.
It’s important to understand that Fannie Mae does NOT segregate foreclosures from delinquent loans when reporting these numbers and that should they report the delinquent results as a percentage of the unpaid principle balance, things would likely look a lot worse.
Finally, the following chart (click for larger) shows the relative movements of Fannie Mae’s credit and non-credit enhanced (insured and non-insured) “Seriously Delinquent” loans.