Cmdr, fyi, the following was posted by the real Tim Howard (former FNMA CFO) on Jan 7, 2017:
The part of my answer that has not changed is that neither company ever purchased $20 billion in toxic loans, or as far as I can tell ANY significant amount of toxic loans, in any month post-conservatorship. My basis for saying that is an analysis of mainly Fannie’s, but also Freddie’s, monthly financial summaries, quarterly 10Qs (filed with the SEC), and annual 10Ks. The monthly summaries give dollar volumes of mortgage purchases and MBS guarantees for each company, while the 10Qs and 10Ks give descriptions of the credit characteristics of the loans they acquire each quarter. Had either one bought $20 billion in toxic loans in any month, let alone for many months, it would have been apparent in their monthly and quarterly financial data. There is no evidence at all of either a surge in volume or a deterioration in credit quality. In fact, on the latter the opposite is true: the risk profile of both companies’ loan acquisitions in the five quarters after conservatorship is better than in the five quarters prior to conservatorship.
Where I’ve changed my view is that I now believe, based on news stories that came out at the time, that Treasury may well have intended to force Fannie and Freddie to buy $40 billion per month in toxic loans, in conjunction with its own intention to use the bulk of the $700 billion in TARP money it received from Congress to buy bad loans from banks and other holders. Treasury, however, could not figure out how to administer such a program (mainly how to price its purchases), so it quickly gave up on the idea, and instead used most of its TARP money to put capital into banks. Once that decision had been made, Treasury couldn’t very well insist that Fannie and Freddie buy toxic loans (for the same reason: how would they price them?) so it dropped the idea.
Most likely, therefore: yes, there was a plan by Treasury to have Fannie and Freddie each buy $20 billion in toxic loans per month from banks, but, no, it never happened.
