Rising Debt Periodic Large Level & Interest One-Time Payments Charges
Entitlement Spending
Fannie Mae/ (-$41 B Net Loss*)
Note: *denotes F2010 net income / net loss of respective programs, data per White House OMB. 1) Medicare and Social Security net loss
excludes Trust Fund interest income. 2) TARP net loss includes proceeds from sale of warrants. TARP is Troubled Asset Relief Program; ARRA
KP is American Recovery & Reinvestment Act programs. (@)E) www.kpcb.com USA Inc. | Income Statement Drilldown 193
Government-Sponsored Enterprises (GSEs):
Recipients of 28% of Net Government (Taxpayer) Funding
e GSEs Fannie Mae & Freddie Mac extended their guarantees on residential mortgages from conventional loans into Alt-A, interest-only and subprime loans.
While technically not part of the federal government, Fannie Mae & Freddie Mac have enjoyed an implicit government guarantee on their debt and RMBS securities as investors believed (correctly, as it turned out) that the federal government would support these entities if they failed. As a result, GSEs’ long- term debt securities receive AAA/Aaa ratings from all rating agencies and are classified by financial markets as “agency securities” with interest rates above USA Treasuries but below AAA corporate debts.
Post placing Fannie Mae & Freddie Mac into a government conservatorship, USA Inc. has so far invested $152B' into these two GSEs with an estimated $8- 13B2 more likely over the next 10 years, given the ongoing weakness in housing market and the poor underwriting by Fannie Mae & Freddie Mac.
Source: 1) U.S. Dept of Treasury, as of 12/10, 2) White House OMB / U.S. Congressional Budget Office. a USA Inc. | Income Statement Drilldown 194
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