Replies to post #760199 on Fannie Mae-No Politics (FNMA)

[kthomp19]

Who is right? I do not know.

Spittler and Ciklin made a claim (FnF were forced by FHFA as conservator to buy toxic mortgages after conservatorship started) that had no evidence behind it. If you choose to believe it anyway, at least now you know that the evidence that could have proved it instead said the opposite.

NOTE: Both have concluded Fannie Mae did not need the Treasury's intervention of a cash infusion.

Wrong. Tim Howard said:

Finally, we can’t definitively say that without the non-cash accounting entries made by FHFA Fannie would have survived the crisis. As I noted in the Perry amicus, had Fannie been managed privately it “certainly would have posted some increase in its loss reserves, had some fair value losses, and booked some impairments on the private-label securities it owned.” At June 30, 2008, prior to the conservatorship, Fannie had $47 billion in capital, and its operating results would have added more through the end of 2011. It would have taken over $75 billion (pre-tax) in combined loss reserve increases, fair value losses and security impairments to exhaust all of that capital. I believe it is highly unlikely that a privately managed Fannie Mae would have had this many book expenses in those three categories, but that is not a fact; it is an (informed) opinion.

It's impossible to say whether Treasury's rescue was necessary. Tim Howard thinks it was unlikely to be necessary but he can't be definitive.



And, more importantly, so what? Even if FnF didn't "need" the treatment they got, it happened anyway. Being "right" about this, which again is a matter of opinion, doesn't change anything.