Even Dave Stevens is Talking about Capital!

Recently, we’ve noted that more people are talking about capital reserves – or more precisely the lack thereof – at Fannie and Freddie.   

Now we can add Mortgage Bankers Association President Dave Stevens to that chorus. In an interview on CNBC today, he acknowledged that the state of limbo for Fannie Mae and Freddie Mac is a problem. Referring to the conservatorship and the lack of action for a successor framework for Fannie and Freddie, he said:

“Under the existing agreements, they will wind down their capital to zero. So we have trillions of dollars of exposure, no capital on the balance sheet and two entities that really, literally finance the vast majority of America’s housing.”

David Stevens - Squawk Box

Stevens acknowledged that Fannie’s and Freddie’s epic profits of recent quarters were one-time events and characterized the GSEs as returning to “more normalized” earnings.

“But that’s certainly not sustainable for two companies that have virtually no capital and are dependent, ultimately, on these lines of credit that Treasury holds,” he said.

As we’ve been saying for months, the Third Amendment sweep exposes the taxpayer to another bailout, shortchanges investors and undermines the rule of law.  It is good to see the message getting through.