Freddie Mac asks for fresh bailout worth $10.6b

09:16, May 07, 2010      

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Troubled US government-backed mortgage firm Freddie Mac asked Wednesday for an additional $10.6 billion from the Treasury Department to cover losses.

Announcing a $6.7 billion loss in the first quarter, Freddie Mac said it would need the new funding by June 30.

The Washington-area company has already received more than $50 billion in taxpayer dollars to cover losses from toxic assets. And it warned that further demands would be on the way.

"Freddie Mac expects to request additional draws," the firm said. "The size and timing of such draws will be determined by a variety of factors that could adversely affect the company's net worth."

In 2008, the government stepped in to ensure that Freddie Mac and its larger sister organization, Fannie Mae, kept their net worth in the green.

The deal was designed to prop up the vital housing market from collapsing and push-ing the economy over the brink.

But in a sign that the US housing sector is still suffering, Freddie said the percentage of its loans not paid on time or in full rose to 4.13 percent in the first three months of this year.

The rate stood at 3.98 percent in the final three months of last year.

The future of Fannie and Freddie has become the latest bone of contention between Democrats, who argue that the firms must remain government-backed to aid low-income housing, and Republicans, who advocate their privatization.

In March, US Treasury Secretary Timothy Geithner swatted aside pressure for a swift reform of the mortgage giants as data pointed to a struggling real estate market.

Geithner told Congress that any restructuring of Fannie Mae and Freddie Mac, which received a $100-billion-plus government bailout at the height of the housing crisis, "must be done as part of a reform of the wider housing finance system."

Geithner argued that reforms would "take several months" to develop, and said they should only be "enacted and executed at a time of greater market stability."

Source: Global Times
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