The US government is the new Enron. People once went to prison for what our government is doing. The government is now using inflated resources held by Fannie & Freddie to lower the deficit artificially while pretending Fannie & Freddie are paying us back.
Fannie and Freddie don’t directly make loans. They buy mortgages from lenders, package them as bonds, guarantee them against default and sell them to investors. In doing so, they help make loans available and exert influence over the housing market.
The government owns Fan & Fred now.
The US government has nationalized the housing mortgage industry through Fan & Fred. They took over Fannie and Freddie who now finance almost every mortgage in this country.
However, Fan & Fred’s financial accounts are separate and that leaves the government free to move money around and pretend it’s money that Fannie and Freddie are paying back to the US taxpayer (all government money is taxpayer money of course).
Fan & Fred are using money they might make in the future – deferred assets – to pay us back. They don’t have it so they are going to borrow it from the US taxpayer at a very low interest rate.
The money is basically going from one government pocket (since Fan & Fred are government now) to another government pocket (the deficit).
This will make the deficit look smaller though the money used is loan money based on profits that don’t exist.
Since they look more profitable they can now charge lenders higher fees. Fan & Fred are government entities serving as middle men who can now feed off lenders like the bloodsuckers they are.
To explain further, Fannie & Freddie borrowed $188 billion from the US taxpayer in exchange for “preferred stock” that gave a 10% dividend. The losses mounted and it didn’t look like they would ever return to financial health.
The losses can be of value if they did make a profit one day however. The losses could offset profits when paying taxes. The government insisted they value their “deferred assets” down to zero from $90 billion, a one-time hit.
These once-failed companies, Fannie and Freddie, are now financing almost every mortgage in the country. As a result, they have made a combined profit of $59.4 billion last quarter. [Investors have no choice but to go into housing or the stock market, that’s where the money is right now and investors are pumping up the housing market]
Fan and Fred decided to unwind some of their “deferred assets” by declaring them valued at $139 billion. They don’t have $139 billion so they have to borrow it from the taxpayer at the very low borrowing rate. They will “pay us back” with that. It is similar to what GM did – they never paid us back either.
Fan and Fred are government creatures but their financial accounts are still separate. Any dividend payment they make increases Fan and Fred’s debt while reducing by the same amount the annual deficit of the government that now owns them. It will delay the debt ceiling showdown.
They are simply moving money around to make it appear they are paying the taxpayer back.
In an Enron-like move, Fan and Fred – government slaves – are using clever accounting to re-create an asset that it can turn into cash and use to pay a bid dividend to an owner/sponsor – the Treasury – who are eager to pump up its finances, even if it is with funny money.
They are about to pay us $159 billion back with fake money they invented using an accounting trick. They are moving money around, paying us back with tax credits on money they might make in the future.
Fan & Fred are pretending they are paying US taxpayers $139.4 billion back.
Review older article from WaPo which explains.