"...The government expects to suffer 'very substantial losses' on its investments in the lenders, with recent estimates ranging around a minimum of $85 billion...."Which loans are the taxpayers bailing out? Pre-September 7, 2008 vintage or post? It matters:
-U.S. Secretary of the Treasury Timothy Geithner
-Center for Economic and Policy ResearchThe Washington Post told readers that Freddie Mac needed an additional $10.6 billion from the government to cover its losses. The article never discusses the extent to which these losses are due to loans purchased before Freddie Mac was taken over by the government in September of 2008 or losses on loans purchased after this date.
This distinction is important because when Fannie and Freddie lose money, it means that they paid banks too much for the loans they purchased.
If they paid too much for loans before they were taken over then this was presumably the result of bad business decisions.
However, if they lose money on loans purchased after September of 2008, then the government is effectively subsidizing banks by paying too much money for their loans.
This was the original intention of the TARP program.
Taxpayers have a right to know if Fannie and Freddie are bing used to subsidize banks by overpaying for their loans. The Post and other news outlets should be trying to answer this question.
