Fannie Mae Capital Impairment
September 26th, 2004 by 
InLibrisLibertas
The Wall Street Journal’s lead story is that, as of the end of 2003, Fannie Mae was probably below its minimum required capital by $4.6 billion. I didn’t say undercapitalized by that because it is undercapitalized by way more than that, with a asset to capital ratio of about 40:1 compared to about 10:1 for a class A commercial bank. On top of which it is not diversified.
Monday morning update: OFHEO announced that Fannie had agreed to increase its minimum capital by 30% while the accounting problems were sorted out.
Posted in Government, Real Estate, Rogues and Rascals, Stocks | 
September 27th, 2004 at 6:38 am
Howdy. I am absolutely positive that where you are there is a housing price bubble. I am not convinced that there is a “bubble” nationally — although last week’s Forune mag. gave me pause. But single-digit gains in home values here, in Oklahoma, especially with steep rises every else, sure don’t suggest a bubble here. Further, I share Galbraith’s concept of a bubble: It’s not just speculation, not just a hot market, not just exuberance, but some mechanism has to be in place to falsely support price increases. I see some such mechanisms in the housing market. Where do you see them? I suppose any low-down or no-downpayment program is one. I suppose the FHA itself is one. What do you think?
When coastal bubbles do pop, what effect would you expect in the heartland — Oklahoma City specifically, where job growth is OK to good and, while the city has diversified fairly well since the ’80s oil bust, we are benefiting some from the current high crude and natural gas prices, and growth in oil exploration-and-operating companies.
I look forward to seeing your views.