AIG, Fannie, Freddie, and GMAC are not only unable to repay the government, they are in need of continuing infusions…

quote
Even as the biggest banks repay their government debt in what is being heralded as a successful rescue program, four troubled giants of the financial world remain on government life support.

These companies, the American International Group, Fannie Mae, Freddie Mac and GMAC, are not only unable to repay the government, they are in need of continuing infusions that make them look increasingly like long-term wards of the state.

And the total risk they pose to the taxpayer far exceeds that of the big banks. Fannie and Freddie, in the final days of the year, are even said to be negotiating with the Treasury about greatly expanding the money available to them.

…

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:

¶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. Company and government officials declined to comment.

¶GMAC, which finances auto sales, already has $13.4 billion from the Troubled Asset Relief Program, and has been in talks with the Treasury about getting up to $5.6 billion more, because a government “stress test” showed it was still too weak.

¶A.I.G., the insurance conglomerate, recently drew $2 billion from a special $30 billion government facility, which was created in the spring after a $40 billion infusion proved inadequate.

Those capital commitments from the Treasury do not capture the full scale of government assistance to the companies. The government has also bought mortgage-backed securities and guaranteed corporate bonds, while the Federal Reserve Bank of New York has made an emergency loan.

http://www.nytimes.com/2009/12/17/business/17wards.html?_r=3&ref=business

Related Posts:

• Smoke and Mirrors! Bernanke and Geithner are destroying the purchasing power of the US Dollar!
• Politics, shaky economy create no rush to restructure Fannie and Freddie
• Warning: Fed is draining $1 trillion from the financial system.
• Let’s try to take an objective view on the situation. (1929 vs 2010)
• 2010: “LESS BAD” again?

Leave a comment