Replies to post #750670 on Fannie Mae-No Politics (FNMA)

[NeoSunTzu]

What you stated is that FnF provided willing and able buyers of MBS which is NOT a technically correct statement of what they do as a business. What you stated in the post that I am replying to now IS more true - that the implicit guarantee allowed investors to continue purchasing MBS created by the GSEs - but that is WHOLLY different than saying FnF are the willing and able buyers and factually not true. But maybe I was just misunderstanding how you worded it - see below.


BUT if you are saying they indirectly provided this benefit because of the implicity guarantee then that is true, but in this instance I doubt many buyers would have continued to purchase FnF MBS without the government EXPLICITY providing the backstop through the UST. BUT you and I know that's NOT FnFs fault because they WOULD be able to do it on their own if the government didn't swipe all their profits.

And no, I do NOT think Wall Street will come back for a "reIPO," at least not the size that is needed. And not especially after what we are now seeing with the SVB incident and potential contagion. One of the reasons the SVB fiasco happend is because the IPO market is/was drying up. Everyone will wait to see the shakeout from this event.

[Wise Man]

No Govt guarantee on MBSs, but a UST backup of FnF in the Charter Act, regarding the purchase of redeemable obligations at a rate similar to Treasuries, such as SPS: "obligations in regard of Capital Stock" (quote from the SPSPA)
In exchange for their risky Public Mission "purposes".
Statutory provision: "Authority of Treasury to Purchase Obligations". Subsection (c). Redeemable obligations. Subsection (b)
The credit losses are borne by the regulatory capital in FnF.
It isn't an insurance against losses, FHA- or FDIC- style. The Govt never bears credit losses. You are here to mislead the public.
The UST is prohibited to get compensated for this backup while there is no actual investment. Subsection: "PROHIBITION".
This is what is explicitly stated in the law. "Implied" or "implicit" Govt Guarantee on MBSs, is used by the scammers.