Less than 30 days into conservatorships, Treasury DIRECTS Fannie and Freddie to buy 40 billion a month of CRAP assets from BANKS to tune of $40 billion a month. It would not take long to accumulate 188 billion in bad assets at that rate. Less than 5 months into the conservatorship or 2 quarters on the stock market, the two Giants would have accumulated $200 billion in bad assets at the direction of the treasury of the USA.
An October 11, 2008 story in Bloomberg reported that Treasury Secretary Paulson had directed Fannie and Freddie in late September (in advance of the passage of the $700 billion bailout) to add to their portfolios of bad mortgage securities to the tune of $20 billion a month each from a $200 billion emergency fund that had been set up to help them deal with the problems that had sent them into conservatorship. This is yet another example of the double-dealing and lack of transparency which has come to characterize Paulson’s approach to the crisis. While he was telling Congress one thing, he was doing something else behind their backs. He used money meant to shore up Fannie and Freddie to increase their liabilities, and he did so in the pursuit of a strategy which the events of the last week have already discredited. To date, Paulson’s instincts on how to deal with the meltdown have been too little too late, and just plain wrong.
Fannie, Freddie to Buy $40 Billion a Month of Troubled AssetsBy Dawn Kopecki - October 11, 2008 00:00 EDT