I Am Not a Financial Genius UPDATED
Work with me here. Freddie Mac (a quasi-governmental version of "Joe's Bank") announced today that it was cutting its second quarter dividend to five cents a share (down 80% from the first quarter). Oh, and it also announced that it lost $821 million in the second quarter, to bring its losses for the past twelve months to over $4.6 billion. Its assets have a negative $5.6 billion "value."
So, if I have this right, I could own a share in Freddie Mac (up 6.9% at yesterday's close) worth $8.04 (down 80% in the last year) and get five cents every three months, twenty cents a year or 2 1/2%, on the price of my share for my stupidity in buying the stock. Where's the five cents coming from? Why your pocket, remember Congress just passed a bill to guarantee $5.5 billion in borrowing by Freddie Mac.
Finally, here's another tidbit to help you sleep. Freddie Mac and its sister, Fannie Mae own or guarantee more than $5 trillion in mortgages, half of all home loans in the country. Freddie has a negative value so it is functionally bankrupt. I can't find the numbers; but, I assume that its sister isn't in much better shape. So, we have $5 trillion dollars in mortgages sitting around, secured by bupkus. My guess? The "subprime crisis" is about to become much bigger. I hope the Chinese make a lot of money on the Olympics, we're going to need it.
Fannie Mae, Freddie's sister, not to be outdone, announced today, August 8, 2008 (08/08/08) that it lost $2.3 billion in the second quarter and reduced its divident from 35 cents a share to 5 cents.
4 comments:
And what about those of us who played by the rules and aren't in credit trouble, what's our reward? We get to pay for the crimes and mistakes that others made. We also get the pass-along charges from every company who has to pay more for gas now.
I'm not feeling the love.
POP,
Thanks for stopping by. Love? Our government too often treats us like the person it wakes up with after a one night stand.
As I'm getting tired of saying, our government had plenty of time and power to deal with the early symptoms of both the oil price crisis and the sub-prime mortgage crisis. Why did they not save us from these tragedies?
Might the failures have something to do with the oil lobby, the real estate broker lobby, the banking lobby, and the investment banking lobby? Their campaign contributions and perks gave them ownership of our political process.
Pissed Off Patricia, you are right. In our system the connected bad guys reap the profits and build their mansions, and you and I pay the bill for their greed.
Sometimes I wonder if the Stalinist idea of "purges" was so bad after all. Start at the top and work down. Don't kill them; just take all their stuff. Even then, we'd never get even.
I absolutely LOVE lifehiker's idea! Therefore, I want some sub-prime mortgage-selling scumbag's new car and I'll also take his beach vacation home for a few vacation seasons ... so, that'll be my share!
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