Fannie Mae-No Politics (FNMA)

[FOFreddie]

Hi Eternal Patience - the primary reason SVB failed was that they did not propertly hedge their interest rate risk. If you examine the valuation scenarios in the CBO report on the GSE restructuring you can see that there is significant interest rate risk in the value of the UST and Common Shareholder stakes. If the UST wants to protect its investment the most prudent action would be to raise outside capital as soon as possible while interest rates and required ROI for new investors are low.

There is too much interest rate risk on the UST balance sheet and pretty much all public debt - the smart thing would be to firm the capital base for the $ 7.2 bn GSE MBS market.