Replies to post #16383 on Fannie Mae Preferred S (FNMAS)

[big-yank]

It is the role of the GSEs to relieve banks of mortgage inventory so new loans can be originated which keeps the housing market healthy and the economy strong since so much of it relies on the housing sector for employment, demand for raw materials, etc. Banks are only allowed to loan a proscribed multiple of their deposits to borrowers under FDIC rules.

The subprime conundrum included the unfortunate reality that all banks basically had to offer the GSEs was below standard paper. If the GSEs did not buy that to repackage and offer as MBS, then simply put the GSEs would no longer serve any purpose at all. So blaming the government for asking the GSEs for assuming the risky paper is totally inappropriate.

JMHO.