Fannie Mae-No Politics (FNMA)

[capitalismforever]

All the answers are in the 10-k. The government believes their assets created large loan losses. I tend to agree. $2.9 trillion of consolidated trusts that they don't own but only guaranty through issuing MBS Bonds only require a loan loss reserve of roughly $600 million. The small asset portfolio they do own of $204b requires loan loss reserve of $22.8 billion. Clearly, owning the assets is where the risk is.

This is why the argument is: if they're going to operate like a bank and own the asset, they should carry a risk-weighted capital requirement of 4% on consolidated MBS portfolio's (banks are 10%). If they're just going to insure them, they don't require nearly the capital requirement. This is why I don't mind seeing that portfolio diminish.

The GSE's were created to provide liquidity through writing and issuing MBS's, not to own the assets like a bank. They should get back to their core business. That's what the government believes and why they've made requirements for them to do so.