This is why "systemic risk" and "too big to fail" are concepts we never should have followed.
Exhibit A: WASHINGTON – Freddie Mac is asking for $10.6 billion in additional federal aid after posting a big loss in the first three months of the year. It's another sign that the taxpayer bill for stabilizing the housing market will keep mounting.
The McLean, Va.-based mortgage finance company has been effectively owned by the government after nearly collapsing in September 2008. The new request will bring the total tab for rescuing Freddie Mac to $61.3 billion.
Freddie Mac says it lost $8 billion, or $2.45 a share, in the January-March period. That takes into account $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $10.4 billion or $3.18 a share, in the year-ago period.
What we have here is a classic example of what our grandparents use to call "throwing good money after bad". Because we have already sunk over $50 billion into rescuing Freddie Mac, we are forever on the hook to bail them out or we risk loosing more than had we just let them collapse on their own.
Freddie Mac and Fannie Mae were part of the fundamental causes to the economic meltdown of 2008. It is irresponsible to the point of being criminal that the Democrats did not address these two entities in their Financial Regulation bill.
We all know that Freddie will get the cash, because they are "too big to fail" and the "systemic risk" of their collapse to the economy is too great. Next quarter, Freddie will be back with a new set of losses and we can start throwing more good money after bad all over again.
Via: Associated Press