Fannie Mae-No Politics (FNMA)

[Ripcord01]

We could have a debate on this that last years...because I have debated that long. My belief the GSEs did not need the capital infusion from the US Treasury in the amounts forced upon them.

Example: The Major banks were all also force to take bailouts. There is an HBO documentary that points out the Fed/Treasury knew only certain banks needed the bailouts they got but in order to get them to take the bailouts they forced it on all the banks. The GSEs needed cash....but they needed cash because AIG and the likes were the insurer for the Mortgage Backed Securities...they could not pay when the insurance money was requested. This is why AIG got bailed out. The GSEs then needed cash to buy the distressed assets in the rest of the Secondary Mortgage Market.

The GSEs were essentially the only game left in town in the meltdown...they did not need cash to maintain their operations...They needed cash to buy the assets of everyone else's operations. The GSEs were used as part of the bailout of the housing market. Even then, they did not need all the money they were given...and those "accounting losses" forced on them came to roost in 2011-2012 when the Net Worth Sweep was instated when those accounting losses suddenly because huge profits on the books. The Interest rates on the loans the Treasury gave the GSEs were high not because of the risk of the loan but to recoup the bailout funds used in the rest of the housing market. They knew the GSEs would not only be left standing but be the only game in town. The government created a Duopoly that competed directly with private MBS issuers...Essentially all but nationalized 2 private companies.

The point I have been trying to make is Treasury/Conservator knew going in that the GSEs were going to be hugely profitable when they bought up all the distressed assets at 10 cents on the dollar once they worked through the carnage. Just go back and look at the GSEs assets the year prior to the collapse and the year after....Their assets literally Tripled on their balance sheets.