I have discussed the so called "implicit" government guarantee, with FNMA, which is a ruse as follows:
1. The stocks are not guaranteed by the government, and the flyer even says so.
2. The BUYER of the home purchases PRIVATE MORTGAGE INSURANCE. (PMI). This is not a government guarantee, but private insurance. This PMI enables investors to buy and sell MBS at will, because, if the borrower defaults, the deficit will be paid BY THE PRIVATE INSURANCE company, not the government. This is not a government backstop, its an insurance policy provided by the borrower to protect the lender/investor.
3. Guarantees are not "implicit". They are guarantees, in writing, or nothing. Its kind of like relying upon a salesman who "guarantees" you wont lose money. In fact, a stock broker MAY NOT tell a client he can not lose money..its illegal. Any stock can go down. Tbills can go down in value, even, if you cash them early and interest rates dont support their current market value. There are no federal guarantees on stocks, or bonds, except TBills, Tbonds, savings accounts and the like. There is no government guarantee on FAnnie mae, and a broker who tells you otherwise can be sued. The so called "implicit" guarantee is just salesmans hogwash. Guarantees need to be in writing, and there is none for fannie investors.
Interestingly, I was going to provide the link to the prospectus when you buy FNMA preferreds (when they were issued). It explains the securities are not government guaranteed in no uncertain terms. However, this link was taken down.
I had posted the link a year or so ago, but I dont think the government likes people knowing there is no government backstop on FNMA. Investors have all the risk, and lost the money. Taxpayers lost none..investors bore the entire burden, not the government. As such, investors deserve the rewards.
The government uses the "government backstop ruse" as an excuse to steal all shareholders money, when no government guarantee exists. Period. NONE. While Fannie is is conservatorship, the government has assumed some financial responsibilities, in the event of another catastrophe. The solution to that, is to release fannie from cship, where there is no un needed/unwanted government financial meddling.
