The GSEs did not need a bailout. The ‘Astronomical’ non-cash accounting losses put on the companies’ books by FHFA forced them to draw $187 billion in senior preferred stock, which, at a dividend rate of 10 percent, required them to pay $18.7 billion per year to Treasury.
The FHFA created an emergency when no emergency existed.
Mr. Howard Quote:” At the time Fannie and Freddie were taken over, the serious delinquency rate on their residential mortgages was about one-third that of prime mortgage lenders, and less than one-tenth that of subprime lenders. Treasury took the companies over not because they were weak, but because they were strong. Paulson said it best himself, when he told the Financial Crisis Inquiry Commission, “[Fannie and Freddie], more than anyone, were the engine we needed to get through the problem.” Treasury needed Fannie and Freddie to help keep the financial system afloat, and it simply took them, under pretense of a rescue. That should be evident to judge Sweeney.“ End of Quote
FHFA freely admitted the companies were adequately capitalized, evidence the companies exceeded capital requirements absolutely no need for emergency funding.
SECOND QUARTER CAPITAL RESULTS
Minimum Capital Fannie Mae’s FHFA-directed capital requirement on June 30, 2008 was $37.5 billion and its statutory minimum capital requirement was $32.6 billion. Fannie Mae’s core capital of $47.0 billion exceeded the FHFA-directed capital requirement by $9.4 billion.
Freddie Mac’s FHFA-directed capital requirement on June 30, 2008 was $34.5 billion and its statutory minimum capital requirement was $28.7 billion. Freddie Mac’s core capital of $37.1 billion exceeded the FHFA-directed minimum capital requirement by $2.7 billion.
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