Though the four are not in all the same businesses, they were caught in one of the same traps: They sold mortgage guarantees — in some cases to each other. Now when homeowners default, as they are doing in record numbers, these companies are covering the losses. Essentially, taxpayer money to these companies is being used partly to protect banks and other investors who own the mortgages.

Like the big banks, these four companies would no doubt prefer to be free of government assistance, which comes with pay and other restrictions on their executives. But they appear at risk of getting onto a debt merry-go-round, where they have to draw new money from the government just to keep up with their existing government debts.

Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so “future dividend payments will be effectively funded with equity drawn from the Treasury.”

All the companies have recently drawn new government money or are in talks to do so...

Read it all.

Filed under: * Economics, Politics • Economy • Consumer/consumer spending • Corporations/Corporate Life • Housing/Real Estate Market • The Banking System/Sector • The Possibility of a Bailout for the U.S. Auto Industry • The U.S. Government

1. Br_er Rabbit wrote: This report sheds a whole new light on “full faith and credit” of the American Taxpayer, which although not explicit, is effectively the case. You and I are on the hook and there’s little we can do about it. December 19, 12:53 pm | [comment link]

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