Fannie Mae (FNMA)

[obiterdictum]

Lets go back to 2008. Then Paulson realized US needed a lot of money to recover from the crisis, and he preemptively seized control of GSE’s to make sure US funding ability would be unchallenged. the agency bonds were a direct threat to the US Treasury. The only way he could have stopped GSE’s from doing what the GSE’s perceived as their charter was to take them over. It was possible the Treasury knew the ability of the market for their paper to take in all the agency bonds and it felt it would be detrimental to the issuance of the Treasuries back then. The FED would do it instead, as the FED doesn’t need to issue any bonds to buy assets, just print currency backed by the assets. It was a perfect solution at the time That would be the the reason for controlling the viable alternative to the treasury buyers.

The Treasury did not takeover the GSEs in the 2008. The FHFA under Lockhart did that in coordination with input, direction and support of Henry Paulson (Secretary of Treasury), Timothy Geithner (President FRBNY) and Ben Bernanke (Chairman of the FRB).

At the time in 2008. the GSEs were mainly used to funnel cash into banks and other financial institutions by purchasing low quality mortgages loans from collapsing institutions. GSE bonds continued to be made and purchased. The Federal Reserve purchased GSE assets as well.

See: http://www.bloomberg.com/apps/news?sid=aDjJYMSphyM0&pid=newsarchive

http://www.reuters.com/article/2008/09/07/us-usa-fannie-freddie-mbs-idUKN0737192820080907

http://www.federalreserve.gov/faqs/what-are-the-federal-reserves-large-scale-asset-purchases.htm

http://bcove.me/inzcu4d9

Does this mean that there is not enough private capital to support the Federal debt and the GSE’s as well?

Through what means will private capital diminish the $18,152,707,189,859.83 (as of 6/16/2015) debt of the US? Taxation? Nationalizations? Frankly, it is a currently insurmountable problem considering the National Budget, the continuing budget deficit, and constant borrowing to pay off loans made to pay off interest and principal of government debt owed. On top of that, there is the 11 trillion in consumer debt.

See: http://www.treasurydirect.gov/NP/debt/current
http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

As far as the GSEs economic capability, the GSE do not need support of private capital or the US Government if allowed to operate freely.

In terms of bonds were FnF becoming a threat to the treasury?

No.