Archive for May 5th, 2010

05
May
10

Freddie Mac seeks $10.6 billion in aid after 1Q loss

NEWS
Freddie Mac seeks $10.6 billion in aid after 1Q loss

Wednesday, May 5, 2010

••• Freddie Mac is asking for $10.6 billion in additional U.S. federal aid after posting a big loss in the first three months of the year.

The McLean, Virginia-based mortgage finance company has been effectively owned by the government after nearly collapsing in September 2008. The new request will bring the total tab for rescuing Freddie Mac to $61.3 billion.

But the company’s CEO Charles Haldeman said, ‘We are seeing some signs of stabilisation in the housing market, including house prices and sales in some key geographic areas’.

Freddie Mac set aside $5.4 billion to cover credit losses from bad mortgages, down from $7 billion in the final three months of last year.

Haldeman cautioned, however, that the housing market ‘remains fragile with historically high delinquency and foreclosure levels’ and high unemployment.

Created by Congress, Freddie Mac and sibling company Fannie Mae buy mortgages from lenders and package them into bonds that are resold to global investors. As the housing bubble burst, they were unable to raise enough money to stay afloat, and the government effectively nationalised them.

Since then, Uncle Sam’s share of the mortgage business has kept getting bigger. Government institutions – mainly Fannie Mae, Freddie Mac, the Federal Housing Administration and the Veterans Administration – backed nearly 97 percent of home loans in the first quarter of 2010, according to trade publication Inside Mortgage Finance.

Late last year, the Obama administration pledged to cover unlimited losses through 2012 for Freddie and Fannie. Freddie’s new request will bring the total taxpayer tab for both companies to about $136.5 billion.

Fannie Mae is expected to release earnings soon and may also request additional financial aid.

With the housing market still on shaky ground, Obama administration officials argue that it is still too early to draft any proposals to reform the two companies or the broader housing finance system.

But Republicans argue that the sweeping financial overhaul currently before Congress is incomplete without a plan for Fannie and Freddie. Senate Republicans propose transforming Fannie and Freddie into private companies with no government subsidies, or to shut them down completely.

‘The events of the past two years have made it clear that never again can we allow the taxpayer to be responsible for poorly managed financial entities who gambled away billions of dollars,’ Senator John McCain said in a statement. ‘The time has come to end Fannie Mae and Freddie Mac’s taxpayer-backed slush fund and require them to operate on a level playing field.’

But Barry Zigas, director of housing policy at the Consumer Federation of America and a former Fannie Mae executive, said Obama officials are right to take their time.

‘They are providing most of the mortgage credit that’s making it possible for Americans to buy homes and refinance their mortgages,’ Zigas said. ‘They’re vital to the housing recovery that everyone is hoping is getting started.’

But the hangover from bad loans made in during the boom years still hurts.

Freddie Mac said on Wednesday it lost $8 billion, or $2.45 a share, in the January-March period. That takes into account $1.3 billion in dividends paid to the Treasury Department. It compares with a loss of $10.4 billion, or $3.18 a share, in the first quarter last year.

The company, however, cautioned that new accounting standards make it difficult to compare the most recent quarter with the year-ago period. In the first quarter of this year, Freddie Mac was forced to bring $1.5 trillion in assets and liabilities onto its balance sheet, causing the company’s net worth to plunge by $11.7 billion.

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05
May
10

Ash Closes Scottish and Irish Airports

NEWS
Ash Closes Scottish and Irish Airports
Wednesday, May 5, 2010

Earth

••• Britain and Ireland have grounded flights again after a fresh cloud of ash swept in from the Icelandic volcano which sparked unprecedented air travel chaos in Europe last month.

In a second day of renewed airspace disruption on Wednesday, thousands of passengers in Scotland, Ireland and Northern Ireland were forced to cancel travel plans.

‘We are feeling disappointed as we were looking forward to it, and I don’t think we’ll be able to rearrange it,’ said Mabel McGeachie, 62, whose easyJet flight from Glasgow to Malaga in Spain was cancelled.

British regulators imposed a flight ban from Scottish and Northern Irish airports from 07:00 am IST (02:00 am EDT) on Wednesday for 12 hours for most affected airports, warning that high ash levels could damage plane engines.

Irish authorities, who stopped flights for several hours on Tuesday, also closed airports progressively from 06:00 am GMT (02:00 am EDT) while saying transatlantic and other planes could still fly over at higher altitudes.

‘The volcano in Iceland has expelled denser, coarser ash higher into the atmosphere,’ said the Irish Aviation Authority (IAA).

It said Dublin airport would stay closed until at least 03:00 am GMT (11:00 pm EDT[Wednesday]) on Thursday, while the southwestern airports of Cork, Kerry and Shannon were closing and would likely remain that way until mid-Thursday.

Britain’s Civil Aviation Authority (CAA) added: ‘Forecasts show that levels of ash in the atmosphere over Scotland and Northern Ireland will exceed the concentrations that engine manufacturers have agreed are safe for operations.’

While the flight ban would remain in place for the rest of Wednesday, the CAA said it hoped the restrictions could be lifted on Thursday.

‘We are pretty confident that the ash plumes will start drifting west across the Atlantic and that all U.K. airspace will be clear of ash tomorrow,’ said a CAA spokesman.

‘It’s possible that if the strength of the wind picks up then some of the airports not operating at the moment might be able to handle flights later today. But it’s certainly looking good for tomorrow.’

The new shutdowns followed a closure of Irish, Northern Irish and some Scottish airspace for several hours Tuesday, causing the cancellation of hundreds of flights and travel misery for thousands of passengers.

Airspace across Europe was closed for up to a week last month after the eruption of Iceland’s Eyjafjoell volcano, but was re-opened after emergency talks between European governments, airlines and regulators.

The aerial shutdown was the biggest in Europe since World War II.

In Iceland itself on Tuesday, the Eyjafjoell volcano spewed more ash than in recent days, although the level remained much lower than when the eruption began three weeks ago, an Icelandic geophysicist told AFP.

‘The plume has increased. It is black… There is more ash in the plume and it is (rising) higher,’ Sigrun Hreinsdottir of the University of Iceland in Reykjavik said on Wednesday.

Irish airline Aer Lingus said the flight ban last month had cost it about $25.70 million, while warning that ‘the final cost will depend on the actual level of customer claims.’

The Association of British Insurers estimated Tuesday that the travel chaos caused by the ash had cost insurers around $93.83 million.

Eurocontrol, the continent’s air traffic control co-ordinator, said more than 100,000 flights to, from and within Europe had been cancelled between April 15 and 21, preventing an estimated 10 million passengers from travelling.
» Check your flight information here: Ryanair, Aer Lingus, Aer Arann, easyJet, Flybe
• Source(s): U.K. Met Office, Irish Aviation Authority, Eurocontrol, Bloomberg, AFP and ITN

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