Morning Brief: Fannie Mae Looks to Treasury for Cash
Mortgage giant Fannie Mae is looking to tap government rescue money. Fannie said Monday that it expects to request up to $16 billion from the Treasury Department, marking the first time the federally run mortgage giant will hit the government's largesse.
Rival Freddie Mac has already received $13.8 billion from the government and said Friday that it expected to request up to $35 billion more when it reports earnings next month.
If Fannie Mae and Freddie Mac both ask for the maximum they've indicated, the price tag for the government takeover of the companies in its first five months would be $64.8 billion. That money is separate from the $700 billion that the government is using to bail out the financial and auto sectors.
When the government seized Fannie Mae and Freddie Mac last year, federal officials pledged up to $100 billion for each to keep them stable. Investments are to be made whenever a company's assets are worth less than its liabilities, giving the company a negative worth. In the third quarter, Fannie Mae and Freddie Mac reported a combined $54 billion in losses.
In other financial news, Provident Bankshares of Baltimore said Tuesday morning that it recorded a wider loss in the fourth quarter as it took a charge on some of its investments and widened its provision for possible losses on bad loans.
The company reported a net loss of $26.7 million, or 88 cents per share, in the fourth quarter of 2008, compared with a net loss of $15.5 million, or 49 cents per share, for the same period of the prior year.
The company attributed the loss primarily to a $32.7 million charge on some of its investments and a $21.5 million provision for loan losses as a result of internal risk rating downgrades in the loan portfolio.
For the full year 2008, the company recorded a net loss of $39.5 million, or $1.38 per share, compared with a profit of $32.1 million, or $1 per diluted share, for 2007.
"As we anticipated, the deterioration in economic conditions during the fourth quarter had a significant impact on our investment and loan portfolios," Gary N. Geisel, chairman and chief executive, said in a statement, and then credited the government's Troubled Asset Relief Program (TARP) for helping the bank stay afloat. "The additional capital received through the TARP program and the continued stability of our deposit base helped us to maintain the financial strength of the Company despite the challenging environment. The TARP proceeds were valuable to continue funding attractive lending opportunities in our marketplace, which resulted in net loan growth of approximately $68 million since the receipt of TARP funds."
Last year, Provident Bankshares agreed to be bought by M&T Bank, a deal expected to close in the second quarter of this year.
January 27, 2009; 9:25 AM ET
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