Fannie Mae-No Politics (FNMA)

[10bambam]

Fannie and Freddie Hopes Hit the Buffers By John Carney

So much for the pipe dream of Fannie Mae FNMA -4.93% and Freddie Mac FMCC -5.32% being recapitalized and released from government control.

In a speech delivered Thursday at a Goldman Sachs GS +0.22% conference in Washington, D.C., Treasury Department housing finance counselor Michael Stegman repudiated the idea that the companies might be able retain earnings to build capital buffers, saying any change in their status would require new legislation. Currently, both companies pay all of their profits to the government each quarter. In order for them to build capital, Treasury would have to agree to change the terms of their bailout. That is clearly off the table.

Critics of the current conservatorship arrangement had recently seized on the plunge in first-quarter earnings at Fannie and Freddie, arguing that their lack of capital might leave the companies needing to once again draw on taxpayer support.

The recapitalization idea, however, has been floating around at least since last October, when Civil and Human Rights Coalition head Wade Henderson pushed for it in a letter to the Federal Housing Finance Agency.

Mr. Stegman pointed out in his speech that recapitalization also would come at taxpayer expense. The only difference is that a recap would be borne by taxpayers immediately while a backstop draw is a future contingency.
http://blogs.wsj.com/moneybeat/2015/03/05/fannie-and-freddie-hopes-hit-the-buffers/