GSEs business are pretty straight forward and safe comparing to banks. Banks may have bank run. Banks operate multiple businesses including some really high risk activities (e.g. forex speculations, over leverage in investments, bad debts due to corruptions, etc). Even so, banks are only required to have 4% capital.
Fannie and Freddie did not require bailout, or they might not be able to turn profitable in 3-4 years (while paying the 10% yearly interest payment to UST on their $181B bailout). IMO. The bailout action was forced upon Fannie and Freddie to rescue the TBTF banks, investment firms and insurance companies. They are all counter-parties to Fannie and Freddie. The insurance companies and investment banks were supposed to reimburse Fannie and Freddie for their book loss in mortgage business. According to an ex-CFO of Fannie, Fannie was well aware of the housing crisis as early as in 2006. They were forced to accept sub-alt mortgages due to government policy (i.e. 25% of their mortgages need to be coming from low-income family). They bought credit-swap insurance from insurance companies and investment banks to cover their known risks. Obviously, the insurance companies and investment banks failed to deliver that coverage. So, I learnt the term Counter-party Risk in 2009. Hope I summarize the picture correctly.
With the many additional measures taken in Fannie and Freddie, they are in a much better position now. They should require no more than 2% core capital.
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