In the summer of 2008, Fannie Mae and Freddie Mac’s financial positions deteriorated sharply: the result of inadequate capital (equity financing) for the risks in the residential mortgages that they held and had securitized. On September 6, 2008, their regulator, the Federal Housing Finance Agency (FHFA), removed senior management and placed these government-sponsored enterprises (GSEs) into conservatorships. Since then, the FHFA and the U.S. Treasury (which extended almost $188 billion to keep them solvent through 2011) have run them...Read More
Will the U.S. federal government ever exit mortgage finance? Not any time soon.Let us explain why.
In September 2008, as investors shunned the debt of Fannie Mae and Freddie Mac, the U.S. Treasury put these government-sponsored enterprises (GSEs) into federal conservatorship, kicking off the most intense months of the financial crisis. Not long after, the CBO estimated the fair value of the GSEs losses at $291 billion (or more than 5% of their end-2009 mortgage portfolios)...Read More