LA Times Weighs In
A report by the L.A. Times this week stated that government agencies Fannie and Freddie Mac (which were seized by the government in 2008 via the bailout fiasco) have been posting some truly promising profits the past few quarters. These profits have aided the United States in reducing our federal budget deficit and delaying an increase in our nation's debt limit as well, which is now scheduled to be needed in the fall of 2013. Unfortunately, according to a new government report, many questions have been raised regarding the accounting practices of these mortgage giants, and their numbers may not be all that they appear to be on first glance.
Federal Housing Finance Agency
Over a year ago, the FHFA said that Fannie and Freddie needed to change their accounting procedures to conform to the way banks write off their mortgages that are over 180 days delinquent. Unfortunately, implementation of this new mandate has been delayed until 2015, three years after the mandate to change these procedures. A top FHFA offical, Jon D. Greenlee, told the inspector general's office in May that implementing this rule could "potentially require them to charge off billions of additional dollars." So basically, until 2015, Fannie and Freddie are going to show excellent profits but then once the new accounting practice takes place, those numbers are going to plummet, and many are predicting at that point that Fannie and Freddie will be shut down.
Profits Now, Collapse Later?
But wait a second, Fannie and Freddie Mac are posting profits, and funneling money into our government's debt issues, and from these "profits" our leaders have put off having to raise our debt limit another $16.7 trillion until later this fall. Aren’t profits to our government supposed to be a good thing? Reducing our debt and showing excellent numbers that make Americans take a big sigh of relief that we may finally be through this economy crisis? So the question remains, have we as a nation learned our lesson and is our financial crisis soon to be over, or does our government simply want us to believe that things are under control, and in actuality we have only simply learned to hide our numbers better? Only time will tell.
Author Bio: Jeffry Evans - I bring you the top resources to get your real estate license. If you're looking to become a real estate agent, check out my site http://www.realestatelicense.org/ to see the requirements and resources your state has.