The 400 Billion Fannie Mae and Freddie Mac Robbery

Jane Hamsher connects the dots over at FDL. The NYTimes has reported:

Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now, according to people close to the talks, officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it.

Now, on the face of it, this makes no sense whatsoever.   They’ve only spent $112 billion of 400 billion and they need another 400 billion?  There two most likely possibilities, which aren’t mutually exclusive are that Freddie and Fannie have a ton of bad crap on the books that they haven’t acknowledged yet.  I have always believed that their losses would be much higher than originally acknowledged.  The second is what Jane suggests, and which I think must be part of the picture:

The White House knows it can’t get approval for more TARP money through Congress, so the administration is going to double the commitment to Fannie and Freddie from $400 billion to $800 billion, and then they can use the money to buy up more toxic assets from the banks

Jane also points out that due to a bill Rahm authored, there is no inspector for Freddie and Fannie.

Because there is a good chance the Fed will be audited, and because banks are still very impaired with bad debt (ie. they still need to be bailed out) Freddie and Fannie may be the only place left to store all the toxic financial wage—to take it off the banks hands.  In the meantime, this is a back door extension of TARP, done this way because the administration knows that Congress would never approve it.