Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

The humongous cash holdings of 100B+ are a drag on earnings simply because they are assets but funded by retained earnings and/or debt. These cash like, highly liquid assets mostly consist of highly liquid treasuries, overnight repos, etc AND EARN A PALTRY 1 OR 2 BASIS POINTS. The twins, like banks, live off the spread of what their assets earn less the costs of their funds. The spread currently is around 60 to 70 basis points.

MC insisted about 2 years ago that the gses hold humongous balances of liquidity much to the dismay of management, knowing it would be a drag on earnings.