The Endless Cycle of Dividend Featuring Fannie Mae and Freddie Mac

Anyone who followed the financial meltdown since 2007 must have heard of Fannie Mae and Freddie Mac. Did you know Fannie Mae's formal name is the Federal National Mortgage Association (FNMA) and Freddie Mac is The Federal Home Loan Mortgage Corporation (FHLMC)? As the titles suggest, they are both affiliated with the government as a government-sponsored enterprise.

This is why I was not surprised when Congress decided to bailout Fannie and Freddie. Of course, this act of kindness was performed with an exorbitant dividend clause. Whenever Fannie Mae and Freddie Mac start to recover, they are required to pay a 10% dividend on their preferred stocks. As of October 2010, The U.S. government received about $150 billion in preferred stocks to save the two firms. This means that the dividend payout to the U.S. government is $15 billion a year.

However, here is where the ludicrousness lies. As a result, Fannie Mae and Freddie Mac are caught in a vicious cycle on dividends:

"In the last two quarters, the firms (Fannie Mae and Freddie Mac) have paid $7.5 billion in total dividend payments, while receiving injections of $5.7 billion to help keep them in business. The dividends could force Fannie Mae and Freddie Mac to keep asking the Treasury Department for more money even after the companies get back into the black..."

Even though there has been protests over the bailout's current structure, the current Obama administration refuses to loosen up on its "cash cow" anytime soon, even if it's for the greater good. Go figure.

Coca-Cola: Happiness Truck

With the booming trend of food trucks, Coca-Cola is bringing a similar marketing campaign via wheels to Rio De Neiro, Brazil. Its "happiness truck" serves as a vending machine and offers curious Brazilian residents a newfound surprise everytime they hit the PUSH button. The project was brought to you by Definition 6 Agency, which also brought the "happiness machine."

Here's a video link to see the happiness on these lucky folks!

Update: Borders Looks To Restructure Firm

Since my last post about Borders declaring bankruptcy, Borders have taken some measures to restructure itself.

The Wall Street Journal reports:

"Borders Group Inc. is continuing talks to a secure a $500 million credit line and has hired bankruptcy and restructuring lawyers, said people familiar with the matter. Borders' restructuring lawyers met Thursday with publishers to pitch them on a plan to defer payments and is talking with GE Capital about providing a new revolving credit facility that would replace existing debt, this person said. Borders hopes the new financing can provide a bridge for the company over the next six to 12 months while it rearranges its business, this person said."