Financial Armageddon

Economic conditions are deteriorating rapidly. Obama, in full campaign mode, continues to spend money as if we have it. He talks about the deficit problem while he continues to make it worse.

As Financial Armageddon pointed out with this recent listing of news articles, we don’t need new spending to exceed projections for the year. Prior spending is out of control and indicative of a government nearing collapse:

“Freddie Mac Has Wider Loss, Seeks $6 Billion From Treasury” (Bloomberg)

Freddie Mac, one of two mortgage- finance companies under U.S. conservatorship, reported a $4.4 billion loss for the third quarter and said it will seek $6 billion from the U.S. Treasury Department.

The company, confronted with a weak housing market and losses on derivatives, will draw on its Treasury cash lifeline to eliminate a net-worth deficit of $6 billion for the three- month period ending Sept. 30, according to a Securities and Exchange Commission filing today.

Today’s request brings Freddie Mac’s total Treasury draw to $72.2 billion.

“FHA May Need U.S. Taxpayer Aid to Bolster Reserves as Net Worth Nears Zero” (Bloomberg)

The Federal Housing Administration may need taxpayer aid or higher premiums to bolster its mortgage insurance fund after reserves fell to a record low this year, according to an analysis presented to Congress.

The FHA, which has paid out $37 billion in claims related to defaulted mortgages in the past three years, faces a 50 percent chance of having to raise money because its net worth has fallen to near zero, according to an independent analysis cited in the agency’s annual actuarial report released today.

“Fannie Mae Asks Taxpayers for Another Bailout” (Christian Science Monitor)

Fannie Mae wants $7.8 billion from the federal government to cover loses. Fannie Mae has already received bailout money to the tune of $112.6 billion.

Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to cover its losses in the July-September quarter.

The government-controlled company said Tuesday that it lost $7.6 billion in the third quarter. Low mortgage rates reduced profits and declining home prices caused more defaults on loans it had guaranteed.

The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. Since then, a federal regulator has controlled their financial decisions.

“Post Office Near Default? Losses Mount to $5.1B” (Associated Press)

The U.S. Postal Service said Tuesday it has lost $5.1 billion in the past year, pushing it closer to imminent default on a multibillion-dollar payment and to future bankruptcy as the weak economy and increased Internet use drive down mail volume.

The financial losses for the year ended Sept. 30 came despite deep cuts of more than 130,000 jobs in recent years and the closing of some smaller local post offices.

Losses will only accelerate in the coming year, Postmaster General Patrick Donahoe warned, citing faster-than-expected declines in first-class mail. He implored Congress to take swift, wide-ranging action to stabilize the ailing agency’s finances as it nears a legal deadline Friday to pay $5.5 billion into the U.S. Treasury for future retiree health benefits.

Congress is expected to grant a reprieve, but that will only delay the day of reckoning for an agency struggling for relevance in an electronic age. Based on current losses, the Postal Service says it will run out of money — or come dangerously close — next September, forcing it to halt service.

“U.S. Boosts Estimate of Auto Bailout Losses to $23.6B” (Detroit News)

The Treasury Department dramatically boosted its estimate of losses from its $85 billion auto industry bailout by more than $9 billion in the face of General Motors Co.’s steep stock decline.

In its monthly report to Congress, the Treasury Department now says it expects to lose $23.6 billion, up from its previous estimate of $14.33 billion.

The Treasury now pegs the cost of the bailout of GM, Chrysler Group LLC and the auto finance companies at $79.6 billion. It no longer includes $5 billion it set aside to guarantee payments to auto suppliers in 2009.

The big increase is a reflection of the sharp decline in the value of GM’s share price.

“U.S. Pension Insurer’s Deficit Hits Record $26 Billion” (Los Angeles Times)

The Pension Benefit Guaranty Corp.’s finances last year were hurt by the weak economy. Its director says it eventually may need a bailout from taxpayers.

WASHINGTON — The federal agency that insures pensions for 1 in 7 Americans ran the largest deficit last year in its 37-year history.

The Pension Benefit Guaranty Corp. said it ran a $26-billion imbalance for the fiscal year that ended Sept. 30.

The agency has been battered by the weak economy, which has brought more bankruptcies and failed pension plans.

Its pension obligations rose $4.5 billion. The PBGC also earned less money in the stock market, which helps to fund pension plans. Returns were $3.6 billion, half what it earned the previous year.

The agency’s director said taxpayers may have to bail out the agency eventually if Congress doesn’t raise companies’ insurance premiums. He didn’t give a time frame.

“Taxpayer Costs Balloon to $8 Billion under Farm Insurance Program” (Environmental Working Group)

New analysis shows private companies raked in profits and delivered big payouts to agribusiness

Washington, D.C. – A newly released report on subsidized federal revenue insurance for industrial crop farmers shows that the government has failed to control its costs and big insurance companies and agents continue to reap billions of dollars in windfall profits. Environmental Working Group, which has long advocated meaningful reform of this misguided policy, commissioned economics professor Dr. Bruce Babcock of Iowa State University to do the analysis.

“It confirmed our worst fears,” said Craig Cox, EWG’s Senior Vice President of Agriculture and Natural Resources.

According to the report, program costs have increased exponentially – tripling to $8 billion since 2000 – and the insurance policies have enticed farmers to buy the most expensive policies, which carry high premiums that are heavily subsidized by taxpayers.