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When we discussed yesterday the alleged "backdoor bailout" of Bank of America by Fannie Mae, we neglected to mention that what the right hand giveth, the left hand taketh away. According to a recent public filing by B of A, expected repurchases of mortgage loans forced on B of A by Fannie Mae and Frediie Mac are up from the $2.8 billion forecast at year end 2010 to $7.8 billion.
As one expert noted, B of A seems to be flailing around in its attempts to get a handle on how bad its ultimate repurchase liability might be.
“Yet again, another line in the sand from Bank of America turns out to be fungible,” Tony Plath, a finance professor at UNC Charlotte, told Bloomberg News. “I don’t think it’s anything nefarious, it’s just that they don’t know what the magnitude of losses in that portfolio will be — and until they do, none of their numbers have credibility.”
When you originate and sell garbage (as noted yesterday, much of it originated by Countrywide), your ultimate financial well-being may ultimately stink.
And speaking of garbage, Fannie Mae has a negative net worth of $5.1 billion and is asking the US Treasury to pony up that amount. Including this latest injection, Fannie and Freddie have sucked $170 billion out of the US Treasury so far, and there's no end in sight.
Any time anyone starts carping about TARP, I'm tempted to throttle them. The federal government has burned through plenty of dollars on the mortgage mess, but don't look at commercial banks for the black hole. Start with Uncle Freddie and Aunt Fannie.
