The Congressional unlimited bankroll guarantee of Fannie Mae at the insistence of the Fed has just cost US taxpayers another huge chunk of money.



Up-Font Addendum



A reader informs me that my take on the following story may be inaccurate, that Bank of America did not sell the loans but rather the servicing rights. A closer reading suggests he is correct. However, I am not going to let a good rant that follows go to waste. Whatever the sale price, or the sale, US taxpayers should not be involved - period. The title of this post was modified.



The Wall Street Journal reports BofA Sells Part of Mortgage Portfolio to Fannie Mae

Bank of America Corp. has agreed to sell part of its home-loan portfolio to government-controlled housing giant Fannie Mae, as the bank looks to shed assets and pare its exposure to an array of mortgage woes.



The deal, finalized last Friday, will deliver the rights to process and collect payments on a pool of 400,000 loans with an unpaid principal balance of $73 billion, people familiar with the deal said. The purchase price is more than $500 million, one of these people said.



The move is part of the Charlotte, N.C., lender's strategy to sell noncore holdings, rid itself of mortgage problems and preserve capital as it repositions its balance sheet to withstand future economic shocks. The bank's shares are down 43% this year amid concerns about BofA's ultimate exposure to mortgage-related losses and lawsuits.



The rights to the 400,000 loans will be transferred to Fannie Mae over four months, starting in September with the first slug of 100,000.



Taxpayers on the Hook

Now taxpayers are stuck with $73 billion in troubled loans and had to pay $500 million for the privilege. This is yet another outrage in a long series of bank bailout outrages.

If you are looking for a reason Bank of America plunged 43% this year, you now have it. It had at a minimum, $73 billion in mortgages clearly not marked-to-market. How much more is it hiding?

Prudent Idiocy