The Fannie hits the fan

Fannie Mae is in serious financial trouble. Luckily, that's the taxpayers' problem now.

Hammered by the ailing housing market, mortgage finance giant Fannie Mae said Thursday it would tap its lifeline from the Treasury Department after reporting $58.7 billion in losses for 2008.

The company, a crucial source of funding for mortgage lenders, said it would draw down $15.2 billion of its $200 billion federal line of credit. In return, the government will receive preferred shares.

And it gave a dour view of the housing market — saying it expects peak-to-trough price declines to be in the 33% to 46% range, up from the 27% to 32% range it gave in the previous quarter. For 2009, it predicts home values will drop 12 to 18%.

For the fourth quarter, Fannie Mae reported $25.2 billion in losses, or $4.47 per share. The results mark the sixth straight quarter of losses, though slightly narrower than it reported in the third quarter. A year ago, Fannie Mae reported $3.6 billion in losses.

The company, which was taken over by the government in September along with Freddie Mac, attributed the losses to soaring defaults. ... The value of non-performing loans were $119.2 billion at year-end, compared with $63.6 billion on Sept. 30 and $27.2 billion at the end of 2007.

Fannie Mae, Freddie Mac, and AIG should simply be shut down. (Or, at least broken up.) Of course politicians won't let that happen because Fannie and Freddie are the only reasons anyone in America can get a low interest mortgage.