Freddie Mac asks for $10.6 billion

What happens when government-sponsored enterprises (GSE's) are given access to unlimited bailout funds through 2012?  They take the money.  From The Wall Street Journal:

Freddie Mac says it will need an injection of $10.6 billion from the U.S. Treasury after posting a $6.7 billion loss for the first quarter, as the weak housing market continued to burn a hole in the company's balance sheet.

Freddie, which had a loss of $9.8 billion a year earlier, said that the brunt of its losses resulted from accounting changes that took effect Jan. 1 and brought some $1.5 trillion in mortgage guarantees onto its balance sheet.

Freddie Mac and its larger sibling, Fannie Mae, were taken over the by the government in 2008 through a legal process known as conservatorship. The government has said it would put unlimited amounts of capital into the companies to keep them afloat over the next three years. Freddie's request for more aid, its first in three quarters, will bring the government's tab for both companies to $136.2 billion.

Freddie has lost $82 billion over 10 of the past 11 quarters, or nearly twice the amount it earned in the previous 30 years. (emphasis mine) [snip]

The earnings report came as Republicans introduced a measure that would end within two years the government conservatorship of the companies, placing them into receivership, a form of bankruptcy restructuring, if they weren't viable. While the amendment would appear to face an uphill battle, it could force Democrats to take a politically dicey vote.

Introduced by Sen. John McCain (R., Ariz.) as an amendment to the financial-regulatory bill before the Senate, the measure would sharply reduce the companies' mortgage holdings over the next three years. It would also repeal expanded limits that have allowed the firms to buy larger loans in high-cost markets and would set new down-payment standards for loans the companies can buy.

Republicans have increasingly argued that the financial-regulatory bill isn't addressing one of the key contributors to the housing collapse, but the Obama administration says it would rather deal separately with Fannie and Freddie next year once housing markets are more stable.

I'm hearing (little orphan) Annie singing "The Sun Will Come Out Tomorrow."  I hope it does.

Meanwhile, Senate Republicans should hold firm against the Democrats' financial reform bill that does little to stabilize the financial markets, nothing to prevent future bailouts, and nothing to reign in the hemorrhagic losses of Freddie Mac and Fannie Mae.