Fannie Mae-No Politics (FNMA)

[Robert from yahoo bd]

There's a reason that the federal government is concerned about Fannie Mae and Freddie Mac MBS, not only is it the backbone of the US Secondary Mortgage Market, the federal reserve utilizes Fannie Mae and Freddie Mac MBS in an attempt to control or influence the long end of the yield curve.

For the federal reserve, it is important that they have a perceived fairly effective tool to manage the long end of the yield curve.

For these reasons having a well capitalized and regulated Fannie Mae and Freddie Mac is compatible with preserving the integrity of the US Secondary Mortgage Market.

now is F and F TBTFail - yes - but "man can not live on implicit food alone"

The Implicit Federal Guarantee on GSE debt and MBS worked for 40 years and continues to work to this day. It's a symbiotic relationship between the federal government and the GSES. The federal government keeps up to $7.2T+ off the federal balance sheet and gets a tool for influencing the long end of the yield curve, and private capital takes a first Loss Position.

What remains unanswered is whether or not private capital will return in sufficient quantities if not recapitalized organically from earnings.