Fannie Mae and Freddie Mac's Days Are Numbered, But It's a Big Number

Lawrence G. McDonald: Fannie Mae and Freddie Mac's Days Are Numbered, But It's a Big Number: "government allowed Fannie Mae and Freddie Mac to become a giant mortgage backed security hedge fund, complete with 70-1 taxpayer funded leverage.

They had sub Libor financing, meaning the luxury of borrowing money at one of the lowest interest rates in the world, all risks backed by the US taxpayer. To understand this kind of leverage imaging walking into the most profitable casino in Las Vegas, all you have is $100 in your pocket. Yet, because of your good credit, the casino allows you to play blackjack with $7000 at risk on the table. The slightest loss and your equity is wiped out. That's exactly what happened to Fannie and Freddie and today the US taxpayers have lost well over $360 billion in this reckless risk taking bonanza. That's over half the cost of the entire war in Iraq."