All of which raises the interesting question of 'what will replace them?'
Regular readers know that your humble blogger thinks that the replacement for Fannie and Freddie should be based on observable event based reporting. It is only when all activity like a payment or default on the underlying collateral is reported before the beginning of the next business day that investors have access to the current information they need for monitoring and valuing securities backed by mortgage loans.
The Treasury Department on Friday revamped its financial support of Fannie Mae and Freddie Mac to accelerate the pace at which the mortgage-finance giants will pay back the government for its rescue four years ago.
In the latest change to a nearly four-year-old rescue, the Treasury Department will capture all the profits that they post in any given quarter, rather than requiring a 10% annual dividend payment.
They won't require payments in periods when the firms lose money, ending a perverse cycle where Fannie and Freddie were borrowing from the government simply to make quarterly repayments.
Administration officials described the move as a way to ensure that the two firms aren't revived as private companies.
Michael Stegman, a senior Treasury adviser, called the move "the next step toward responsibly winding down" the two mortgage-finance firms.