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Fannie And Freddie: Political Winds Shift In Favor Of Retaining Earnings

Seeking Alpha, By David Sims

A heap of political developments in the past few days suggest that lawmakers and regulators are moving closer to allowing Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) to retain capital. Yesterday, a bipartisan group of Senators put forth a budget point of order that would end the use of guarantee fee increases to offset federal spending and House Republicans have included plans to privatize the companies. Further, Wednesday morning we received news from an internal watchdog of the Federal Housing Finance Agency (FHFA) that warns Fannie and Freddie may need another bailout due to reduced capital standards.

These three key developments point toward the eventual end of the net worth sweep of Fannie and Freddie. This does not preclude Congress from eventually passing a reform bill of the two mortgage giants.

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