Fannie Mae-No Politics (FNMA)

[Donotunderstand]

BIG

if what you say is true (the tail wags the dog)

then do you prefer that write ups and write downs of assets held on the books when interest rates fall and rise be the driver of performance? (removing hedges opens up F and F to wild swings in the value of assets - just changes which asset is impacted? )

or, without hedges for protection, maybe you want F and F to be private highly regulated utilities. As regulated utilities they could be deemed to not be subject to mark to market valuation of interest rate sensitive assets held.

Assuming a high enough capital requirement (I have no idea what % that is) - such "immunity" from FASBE mark to market valuation of assets due to interest rate changes could save F and F a ton of money (I assume F and F do not WRITE their own hedge derivatives but buy them from Wall Street and the TBTF banks and AIG types)

??
Such immunity could save a bunch of money and stop the cycle up and down you point out .

At same time such immunity IMO could during a period of rising interest rates mask some potential "imminent" big time cash problems. If assets are not held on the books at what they can be sold at (say worth 70% of the booked value) and such assets need to be sold to create cash ---- a death spiral could begin

For example F and F need cash and they sell assets. With no hedge and no mark to market - during rising interest rate times - we could see F and having to sell 500 million of booked value of assets to raise 350 million dollars cash. The 150 million loss in this example would drop directly to the P and L
??
not an accountant - and asking if

1. Not hedging results in an exchange of what causes a cycle of ups and downs in earnings - the derivatives are out but the changes in value of assets is in.

OR

2. If maybe under a PRIVATE utility model that comes with higher capital requirements the impact of rising and falling interest rates can be taken off the table as an issue -- by saying F and F are not subject to FASBE on this