Replies to post #353175 on Fannie Mae-No Politics (FNMA)

[SGINPHX]

I have read the reports.. and the "report" that you attached which is one sided view of what happened IMO. Were the GSE's leveraged..yes..that's their business. Did they have 44 billion at the end of 07 as capital buffer? yes according to 10K's. Did they need that much to weather the storm? No..they only had 2 bad years that didn't amount to 44 billion UNLESS you took into account the accounting practices forced on them. I am not arguing that they had a couple bad years..may not argue the original deal of conservatorship ( still out on that and hoping more releases shines more light ). I definitely don't believe that the 3rd amendment was either necessary or right! I own a lot of commons (6 figure) as I believe that is the best return. I have read and understand your thesis on the prfd's and that works for you. Your take on the profitability makes me wonder what you are trying to accomplish as the GSE's have been profitable even after the DTA's..the hedging, which is pretty std, has mostly hurt as interest rates have declined and yet they still show a profit albeit not as large. I fully agree that they are not capitalized enough but whose FAULT is that?? Release them and let them capitalize! Your comment about the taxpayer not being a sugar daddy again has me confounded as the GSE's are a PRIVATE company no different than any whose shareholders, both large and small, should profit and hold the company accountable. I believe the taxpayers understand that to have a 30 year mortgage there are some trade offs and if the gov't didn't want them to be private MAYBE they shouldn't have sold them to finance a war! Further, the taxpayers HAVE been paid back had this been treated like any or ALL the other bailed out companies. But again...if you feel that way WHY ARE YOU INVESTED IN THESE?!? You still need a similar action that would raise the common to raise the preferred unless you are hoping for liquidation???

[brandemarcus]

Yank you are distorting the picture with many statements on that post.

1. Reversing Dta's and derivative gains have not been the sole source of income. There is core net interest income of at 20 billion per year even in 2008 and 2009. Most of the derivative effects have been losses. Dta gains in 2013 were just write backs from dta losses in 2008 and 2009 which you have no problem trumpeting. I'll take back the gains from dta's in 2013 , you take back the losses from dta's in 2008 and 2009.


2. So there were a combined 5 trillion in guarantees. The bad loan rate varied between 2% and 6% during the crisis. It was only 2.4% at the end of 2008 as the crisis took time to spread to Main street. Let's use 5% ,so that's 250 billion dollars to deal with.

3. We next have to take the recovery rate as the properties still have value even in foreclosure. Remember also that either the buyer or the mortgage insurance company is responsible for the first 20% of the loss. Let's say they lose 40% on each 250 billion so that's only combined losses of 100 billion combined for Fannie and Freddie.


4. The losses were not all of a sudden on a specific date, they were delayed for all sorts of reasons. There was plenty of time to build up loss reserves from an average of 30 billion per year in net interest income at the companies. Even in 2009 charge-off's per year for Fannie Mae were 33 billion then subtract 15 billion in net interest income in anyone year and that's 18 billion per year. So you need 76 billion in loss reserves or more than 4 years reserves. Come on !


5. This is not rocket science as Timmy G once said. You can understand it , Judge Millet should be able to understand it. Ted Olson should be able to explain it. Hopefully Tim Howard will get a chance to explain it. Quit shifting the goal post we are looking at 2011-2012 , not 2008 here!