OFEO, FNMA and FRE's regulator is reducing capital surplus requirements for the two firms. What does this mean? FNMA and FRE can now buy more mortgages because they are no longer constrained by capital requirements. What does this really mean? They can pile on more leverage! Leverage is great! Anyone can make money getting highly leveraged, as long as they have a government guarantee when the market panics and is afraid to lend money during a credit crisis. Remember about a year ago when the Government hated FNMA and FRE? All those accounting scandals? Remember when FNMA and FRE lost billions of dollars last quarter? Yeah, me neither. We always forget those pesky things in an election year.
Fannie, Freddie get OK to buy more mortgages
Wednesday, March 19, 2008
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