With much, much more to come.
They didn't say it in the 16 page news release but in the 10Q filing with the S EC fessed up:
"...Given our expectations regarding future losses and draws from Treasury, we do not expect to earn profits in excess of our annual dividend obligation to Treasury for the indefinite future," Fannie said. "As a result of these factors, there is significant uncertainty as to our long-term financial sustainability...."*The next day the Senate in it's collective wisdom thought they should order a study.
From Bloomberg:
Senate Approves Study of Fannie Mae and Freddie Mac
The U.S. Senate approved a proposal to order the Treasury Department to study how to withdraw government support of Fannie Mae and Freddie Mac, rejecting a Republican deadline for ending aid to the two companies.*Page 13 0f the 196 page filing under the sub-head "Outlook":The Democratic measure to study the companies, passed on a 63-36 vote, becomes part of the Senate’s financial regulation bill. It would direct the Treasury to study and make recommendations for ending government conservatorship of the companies in a way that minimizes cost to taxpayers.
The Senate voted 56 to 43 to reject the Republican amendment to phase out the mortgage-finance companies in two years and eliminate their government support.
“Don’t tear down what you have unless you know what you’re going to replace it with,” Senate Banking Committee Chairman Chris Dodd said during the debate. He called the Republican plan “the height of irresponsibility.”
Fannie Mae and Freddie Mac have drawn on nearly $145 billion in government aid since September 2008. Under the failed amendment filed by Republicans John McCain of Arizona, Richard Shelby of Alabama and Judd Gregg of New Hampshire, government aid would have been phased out within two years and the companies’ affordable-housing mandates repealed.
“The system cries out for reform now” McCain said during debate. “We’re doing nothing about it except ask the secretary of the Treasury to conduct a study? Remarkable.”
Democrats say they will look for ways to repair Fannie Mae and Freddie Mac later this year. In the meantime, the companies are needed to provide liquidity in the mortgage market, said Dodd. He called McCain’s proposed phase-out “drastic.”
‘Eager’
“This program needs to be fixed, no question about it,” Dodd said during debate. “You need an alternative housing finance system. But this amendment doesn’t offer any. It just says get rid of the one you’ve got.”....MORE
Uncertainty Regarding our Long-Term Financial Sustainability and Future Status. We expect that the actions we take to stabilize the housing market and minimize our credit losses will continue to have, in the short term at least, a material adverse effect on our results of operations and financial condition, including our net worth. There is significant uncertainty in the current market environment, and any changes in the trends in macroeconomic factors that we currently anticipate, such as home prices and unemployment, may cause our future credit-related expenses and credit losses to vary significantly from our current expectations. Although Treasury’s funds under the senior preferred stock purchase agreement permit us to remain solvent and avoid receivership, the resulting dividend payments are substantial. Given our expectations regarding future losses and draws from Treasury, we do not expect to earn profits in excess of our annual dividend obligation to Treasury for the indefinite future. As a result of these factors, there is significant uncertainty as to our long-term financial sustainability.In addition, there is uncertainty regarding the future of our business after the conservatorship is terminated, including whether we will continue in our current form, and we expect this uncertainty to continue. On April 14, 2010, the Obama Administration released seven broad questions for public comment on the future of the housing finance system, including Fannie Mae and Freddie Mac, and announced that it would hold a series of public forums across the country on housing finance reform. Treasury Secretary Geithner testified in March 2010 that the administration expects to present its proposals for reform to Congress “next year.” We cannot predict the prospects for the enactment, timing or content of legislative proposals regarding longer-term reform of Fannie Mae, Freddie Mac and the Federal Home Loan Banks (the “GSEs”). Please see “GSE Reform and Pending Legislation” in our 2009 Form 10-K for a discussion of legislation being considered that could affect our business, including a list of possible reform options for the GSEs.
