Freddie Mac needs another taxpayer bailout

Government-controlled mortgage
buyer Freddie Mac is asking for $1.8 billion in additional federal aid after
posting a larger loss in the second quarter.

The struggling mortgage lender
posted a lost $6 billion, or $1.85 per share, in the April-to-June period.

The company is required to pay a 10
per cent annual dividend to the Treasury Department on money it has received
from the government. That made up $1.3 billion of the company’s second-quarter

The company lost $840 million, or
26 cents a share, in the same quarter last year.

The government rescued McLean,
Va.-based Freddie Mac and sibling company Fannie Mae from the brink of failure
nearly two years ago. The new request means they have needed $148.2 billion to
stay afloat, about $63.1 billion of which is being used by Freddie Mac.

Freddie Mac is losing money from
bad loans it backed, many of them before the housing market went bust. It had
$118 billion in bad loans at the end of June, up from $103.4 billion at the end
of last year. It owned more than 62,000 foreclosed properties in June, up from
about 35,000 a year earlier.

Both Fannie Mae and Freddie Mac
have both lost tens of billions of dollars during the past two years and both
are asking the government to prop them up. Last week, Fannie Mae requested $1.5
billion after posting a loss of $3.13 billion, or 55 cents per share, in the
second quarter.

Fannie and Freddie own or guarantee
about half of all U.S. mortgages, or nearly 31 million home loans worth more
than $5 trillion. They buy home loans from lenders, package them into bonds
with a guarantee against default and sell them to investors.

During the housing boom, Fannie and
Freddie faced political pressure to expand homeownership and competitive
pressure from Wall Street to back ever-riskier loans. When the market went
bust, defaults and foreclosures piled up, and the government had to take them

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