No, the Future of Fannie and Freddie Is Not a 'Sideshow'

(RECAP: Despite the fact, documented by the Congressional Budget Office, that Fannie and Freddie have contributed $63 billion to taxpayers (on top of repaying their 2008 advance), the sweep agreement not only takes away 100% of their net profits every quarter — but takes away a portion of their remaining capital each year, reaching zero net worth in January 2018. Claims that the GSE’s lack of real capital is a “sideshow,” that a line of credit is just as good as real capital, — and that this does not have consequences — is directly rebutted by the GSEs’ regulator, the FHFA. In a February 2016 speech, FHFA Director Mel Watt said that the GSEs’ lack of capital is their “most serious risk.” He warned of real world consequences of a Treasury Department draw, including harm to investor confidence in the GSEs’ mortgage-backed securities and “a legislative response adopted in haste or without the kind of forethought it should be given.” This is not a sideshow. It is the main event.)