Limitless Government Stimulus

12/28/09 Baltimore, Maryland – Say what you want about the U.S. Treasury, but this much is true: They give damn good Christmas presents.

Just ask Fannie Mae and Freddie Mac. If you haven’t heard – which many people haven’t, since the Treasury quietly pushed this through on Christmas Eve – Fannie and Freddie now have access to unlimited government funding. Seriously, limitless.

After being put into conservatorship in September of last year, Fannie and Freddie were given a nice $200 billion government cushion. (The two mortgage misfits have already managed to burn through $111 billion of that bailout.) The Treasury announced on Christmas Eve that it has removed the $200 billion cap, “to accommodate any cumulative reduction in net worth over the next three years.” It’s a slimy move, but we’re a tiny bit impressed… what’s the point in pretending that either of these institutions will ever be allowed to fail?

As taxpayers we had no say in the matter, but as investors we take note: It would be hard to bet against any company in 2010 that’s just been written a government-backed blank check. (Shares of Fannie and Freddie opened up over 15% this morning.) Also, isn’t this an implicit Treasury forecast of more housing hurt?

Ian Mathias

Ian Mathias is managing editor of The 5 Min. Forecast. We discovered Ian working as a full time rock climbing guide and writing on the side. As it turns out, markets and global economics can be extreme too… at least enough to keep him around. Since working for Agora Financial, respected media outlets including Forbes.com, the Associated Press, Yahoo, and MSN Money have syndicated his writing. He received his BA from Loyola College in Maryland and is currently studying writing at the graduate level.

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