Throwing MORE good money after bad?

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http://www.foxbusiness.com/story/markets/industries/finance/fannie-mae-lost--billion-quarter/?test=latestnews Mortgage giant Fannie Mae (FNM) bled another $13.1 billion during the first quarter, prompting the U.S.-owned company to request another $8.4 billion cash infusion from the Treasury Department. Fannie Mae, which was placed into conservatorship in 2008 amid enormous mortgage losses, said it lost $13.1 billion, or $2.29 a share, last quarter, compared with a loss of $16.3 billion, or $2.87 a share, during the fourth quarter of 2009. The company blamed the heavy losses on credit-related expenses that remain “at elevated levels” due to weakness in the U.S. economy and the housing market. “In the first quarter we continued to serve as a leading source of liquidity to the mortgage market, and we made solid progress in our ongoing efforts to keep people in their homes,” CEO Mike Williams said in a statement. Fannie said it purchased or guaranteed about $191.4 billion in loans during the first quarter and completed 94,000 loan modifications. The company said its purchases and guarantees financed about 516,000 conventional single-family loans and about 61,000 multifamily units. Due to the heavy losses, Fannie said the Federal Housing Finance Agency has asked the Treasury Department for $8.4 billion on or before June 30. Fannie already received $15.3 billion at the end of 2009. Last week sister company Freddie Mac said it would need another $10.6 billion from the government. Fannie didn’t shy away from saying it will continue to need cash, saying, “Due to current trends in the housing and financial markets, we continue to expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury.” Shares of Fannie soared 6.8% to $1.10 in Monday’s premarkets, almost doubling the gains in the futures markets amid enthusiasm for Europe’s $955 billion rescue. Fannie’s stock was down almost 13% year-to-date as of Friday’s close. Fannie said credit-related expenses rose sequentially to $11.9 billion last quarter due to loan modifications. Due to rising defaults, credit losses rose to $5.1 billion in the first quarter from the prior quarter. Fannie’s single-family serious delinquency rate increased to 5.47% at the end of the first quarter, up from 5.38% at the end of 2009. “Promoting sustainable homeownership and maintaining ready access to liquidity are our guiding principles in serving the residential markets,” said Williams. “The strong credit characteristics of our acquisitions during the quarter are evidence that we continue to strike an appropriate balance in providing liquidity while also applying the lessons of the recent credit cycle.” The future of Fannie and Freddie remain in doubt. Neither company has been included in the Obama administration’s financial regulatory overhaul. What is your opinion and solution?