Fannie Mae Preferred S (FNMAS)

[rosen62]

The companies are afloat because of Treasury's funding commitment. Without it, they become technically insolvent. And so far they haven't been allowed to recapitalize.

I think those who believe that "profits" equal to "everything is fine" are deluding themselves. Right now, profits do not stay at the companies and there is a legal battle going on to determine what part of the profits belong to which entity. Then, there is the issue that in the future profits stemming from g-fees may not flow to the GSEs. Not to mention profits from their retained portfolio which will dwindle.

With a removal of the Treasury's commitment FHFA can always claim insolvency and therefore receivership. The chances of this are slim as it will create yet another set of issues. And I don't think Treasury wants to become embroiled in more conflict. They may not act nice but they are not stupid.