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White Paper Raises a Thorny Issue:

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navycmdr Member Level  Tuesday, 12/22/15 01:11:55 PM
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White Paper Raises a Thorny Issue:

Could Fannie Mae Have Avoided Conservatorship ?

By Carisa Chappell cchappell@imfpubs.com

A number of financial indicators and documents suggest that Fannie Mae was not in dire straits back in 2008 and could have survived the housing meltdown, according to a new white paper.

Penned by activist GSE investor Adam Spittler, Mike Ciklin, owner of a small law firm specializing in MBS, and G. Stevenson Smith, an accounting professor who writes on fraud issues, the white paper argues that the only years Fannie showed negative cash generation was in 2009 and 2010, but not in 2008 when it was taken over by the U.S. Treasury and the Federal Housing Finance Agency.

The authors reviewed financial statements to better understand the viability of the GSEs from 2007 to 2014. ?It is likely that Fannie Mae could have survived the financial crisis without the intervention of the Treasury,? they write.

Fannie was placed into conservatorship in September 2008. The three write that roughly two weeks earlier, on Aug. 7, 2008, the FHFA informed Daniel Mudd, then Fannie?s president and CEO, that the GSE was ?adequately capitalized under regulations based on certified information that was considered true and correct.? For more details, see Inside The GSEs, now available online.

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