Fannie Mae Datapoint of the Day

Peter Eavis, who started

the Fannie Mae ball rolling on Wednesday, moves

the story further today, with this rather startling and scary datapoint:

Using fair value accounting, Fannie Mae’s capital — the company’s net worth

— has declined sharply this year. According to a fair value version of its

balance sheet contained in a recent filing, Fannie Mae’s capital was $34 billion

on Sept. 30, a 20% drop from the end of last year.

Now, $34 billion in capital is still a lot of capital. But $8.5 billion is

an enormous amount of capital to lose in less than one year – especially

when you don’t seem to be making any effort to be particularly aggressive in

terms of accounting. Fannie should, by rights, be part

of the solution to the subprime crisis; at the moment, it’s looking more

like part of the problem.

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