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Addressing Mortgage Malinvestment (Part III)

Fannie Mae and Freddie Mac continue to distort the mortgage markets and are nowhere near a proper wind down after four years in government conservatorship. I reviewed the SEC reporting for each of them over the past few years and found that they still have total assets in the range of $5 trillion, which has stayed steady for the past three years. I summarize my findings in an editorial in the Wall Street Journal today……

“At the height of the presidential election campaign, the Treasury Department issued a press release called "Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac” highlighted a new policy to scale back the pair's mortgage-investment portfolio at a rate of 15% per year, as opposed to their stated 10% rate. Reports from the Securities and Exchange Commission, however, suggest that these two government-sponsored enterprises—currently under federal conservatorship—may not be shrinking much at all. The Treasury announcement, coming near the fourth anniversary of the September 2008 government takeover of the mortgage behemoths, was made during an election campaign with a heavy focus on the health of the economy. The impression it left was that the most expensive of the 2008 bailouts was not much of an issue, as the transition back to stability in the mortgage market is well under way.”

For the full article.

I have also been busy with Freedom of Information Act requests to see if the government is considering placing Fannie and Freddie in receivership. There has been some movement on this front, but only some work being done by PricewaterhouseCoopers to lay out some options as reported by Bloomberg which included reference to a contract I dug up from the Federal Housing Finance Agency, the pair’s conservator.