by Pam Martens and Russ Martens, Wall St On Parade:
On April 21, Wall Street On Parade reported that the U.S. government (also known as the U.S. taxpayer) was on the hook for potentially tens of billions of dollars in derivative losses at Freddie Mac and Fannie Mae – the two companies the government put under conservatorship during the Wall Street financial collapse of 2008. (See related article below.)
This morning, Freddie Mac is adding further angst to this potential derivatives blowup scenario by reporting that it lost $4.56 billion in its derivatives portfolio in just the first three months of this year – a stunning 90 percent increase over what it lost in derivatives in the first quarter of 2015. That brings its derivative losses for all of 2014, 2015 and the first quarter of 2016 to $15.54 billion. (See chart below.) This is certain to bring gasps from some members of Congress.
While positive net income has offset the derivative losses in recent years, making Freddie Mac profitable overall, the company said in its press release this morning that it had an overall $354 million net loss for the first quarter of this year, meaning the derivative losses fully wiped out the earnings it makes from its portfolio of mortgages and other sources of positive income such as the fees it collects for guaranteeing mortgages.
Despite acknowledging that its net worth is a mere $1 billion, Freddie Mac said in its press release that it would not be drawing further from the U.S. Treasury at this time. Under the conservatorship arrangement, the U.S. Treasury has already infused over $187.5 billion into Freddie Mac and Fannie Mae. But according to a government audit released by the Government Accountability Office (GAO) on February 25 of this year, the U.S. Treasury has committed taxpayers to an additional $258.1 billion that Freddie Mac and Fannie Mae can draw down.
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