philipmax. I think what you're asking is how FnF fit into the QE3 picture? Somebody correct me if I'm wrong but:
1) Banks write mortgages to home buyers.
2) Banks don't want to keep these mortgages on their books for 30 years, so they package them as mortgage-backed securities which are sold to companies like FnF.
3) The government then issues bonds which purchase these MBS from said companies (e.g. FnF).
4) The government then sells these bonds to investors like Goldman, Lehman, etc.
5) The bonds are then sold to main street through the market/index funds.
The money trail is all pretty tightly linked. Remove that buying pressure from the top and you can see what happens...
As somebody just stated, even when the QE taper does occur, the projected bond buying will be cut approximately in half. Even at that rate, FnF would be churning out ~4-5B in profits per quarter. These are still incredible margins. When QE finally ceases, profits could drop to 1/10 or so of what they are currently but that is still a very profitable and sound company. Unfortunately, DeMarco can't play a guessing game with the finances until some financial stability has been shown even in the presence of a taper (to do otherwise would be occupational suicide). He'll then have a much stronger argument (and solid data) backing up his declaration of FnF's solvency.
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