More Fannie Losses

Fannie Mae reported quarterly losses (also here) of $29 billion for the third quarter. This is a huge amount of losses, greater than all of Fannie's profits from 2002 to 2006 -- the height of the boom in housing. This suggests that we have not yet reached the bottom of the housing boom.

It is also instructive of the unintended consequences of government policy. Apparently, Fannie is having great trouble refinancing its bonds. The reason is that as a GSE Fannie has only an implicit government guarantee. But banks now have much more explicit government guarantees, indeed many are partially government owned now. So the costs of borrowing for Fannie (and Freddie) are much higher. This will make it harder for Fannie and Freddie to extend lending which the government wishes they would.