There are some cool charts, and a useful discussion of the continuing travails of Fannie Mae, at EconomPic Data. Let me give you the high points to induce you to read the rest of the post:
Fannie Mae lost a reported $29 Billion in Q3. Over the past 7 quarters, they have now lost ALL earnings associated with the housing boom.
Notice how this is becoming the pervasive story of this entire era: all of the financial firm earnings eaten up by subsequent losses. And those profits were AFTER paying generally egregious bonuses based on what amounted to phantom profits (i.e. had adequate reserves been taken for the risks, earnings would have been de minimus).
Back to the post:
But after the $100 Billion Treasury injection and a variety of new liquidity facilities, the future must look bright… right? Well, maybe once they get past problems associated with their soon to be negative net worth, lack of liquidity, and bad loans. Les get some more details.
Under the Regulatory Reform Act, the Federal Housing Finance Agency MUST place Fannie Mae into receivership if their assets are less than obligations for a period of 60 days (I’ll believe that when I see it).
Net worth is down from $44.1 Billion as of December 2007, to a reported $9.4 Billion at the end of September 2008. Of that $9.4 Billion, almost half is deferred taxes (i.e. provides no benefit without futures earnings)….
There is absolutely no way any Agency MBS will be allowed to fail as the outcome would be disastrous. At the same time, putting Fannie and Freddie on the Treasury Balance Sheet is not an option as there is incentive to keep up the appearance of Fannie as a “going concern” regardless of how much money they lose (this would require too much transparency). In other words, I expect the original $100 Billion to just be a drop in the bucket.