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Fannie, Freddie, and Financing Models of Last Resort

Posted on July 08, 2008

Ugh. I m still not home yet, but after my recent 48-hour news blackout, the news on Fannie (FNM) and Freddie (FRE) is pretty amazing. Now, I would not be so certain that an interpretation of SFAS 140 would force Fannie or Freddie to raise capital GAAP accounting often has little to do with regulatory capital rules. Only if OFHEO decides to mimic the treatment in GAAP would it force capital-raising, absent any net worth covenants on their debt that might be poorly written. All that said, the problems with Fannie and Freddie are not primarily accounting-driven, but are being driven b...

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