Original post:
As we said yesterday: Survival of the entity does not ensure survival of the equity.
From The Hill:
Mortgage giants Fannie Mae and Freddie Mac are now basically a "public policy instrument" of the government, Rep. Barney Frank (D-Mass.) suggested Tuesday.
Frank, the chairman of the House Financial Services Committee, asserted that the companies, which were taken over by the U.S. in September 2008, have become an extension of the government's policy-making tools.
"Remember now that Fannie and Freddie have been converted," Frank said during an appearance on CNBC. "Part of the losses of Fannie and Freddie are that since the housing collapse, Fannie Mae and Freddie Mac have become a kind of public utility."
Frank made that claim in response to reports that the government may lose as much as $400 billion from its conservatorship of Fannie and Freddie, assistance that was made available when the home loan companies were put on the brink of collapse due to the subprime mortgage crisis.
The Financial Services chairman defended those losses, saying they were incurred in part due to a conscious decision by the government to use the companies to extend assistance to homeowners with underwater mortgages.
"They're not what they used to be — that inappropriately hybrid, private stock company, public policy instrument," Frank said. "They have become the public utility that finances housing in America to a great extent. Part of the loss is a public policy decision that it would be worse to not have some support for the housing market."...
Here's the video, from CNBC:
