tag:blogger.com,1999:blog-4815867514277794362.post2621517754332974..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Modelling Fannie Mae and Freddie Mac – Part VJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-4815867514277794362.post-34613096092379840002009-08-19T05:31:02.955+10:002009-08-19T05:31:02.955+10:00This has been a fascinating series. I'm still ...This has been a fascinating series. I'm still trying to digest the implications of it. <br /><br />Don the libertarian DemocratDonald Pretarihttps://www.blogger.com/profile/14493535232127084725noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-957175017305248632009-08-19T02:18:22.262+10:002009-08-19T02:18:22.262+10:00This is a scary realization. I can only hope this ...This is a scary realization. I can only hope this simmer down a bit before these quasi-monopolies make or break the American dreams.VBPOutSourcinghttps://www.blogger.com/profile/09823213002629451982noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-4211497579277152502009-08-18T08:56:25.499+10:002009-08-18T08:56:25.499+10:00It is pointed out that Fannie has a MUCH lower net...It is pointed out that Fannie has a MUCH lower net interest margin than Freddie. <br /><br />During the last quarter the net interest income at Fannie was 3735 - over half a billion lower than at Freddie. And it is lower on a bigger book - suggesting fairly dramatically lower margins.<br /><br />Some of this is just that Freddie has got the hedging better than Fannie. (See my post on how good Freddie is). <br /><br />Some of this is the difference in how things are accounted - with Freddie issuing callable debt and running more income back through the P&L because of tricks of derivative accounting.<br /><br />But there are lots of other effects - and frankly I would love some advice on this. <br /><br />I followed Fannie and Freddie for years - and the accounting for their net interest income has always been fraught with difficulty. <br /><br />I simply do not know how to break this up.<br /><br />If I had uncertainties as to this model it is NOT on the credit side - I think we have enough to model that now.<br /><br />It is on the income side and without access to the management to grill I have no idea. And the guys I know who might have had some idea - they are no longer at Fannie or Freddie.<br /><br />JohnJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-10420811935673584312009-08-18T05:34:00.858+10:002009-08-18T05:34:00.858+10:00FRE margins seems to have exploded. Read the FNM r...FRE margins seems to have exploded. Read the FNM report and with the fair value losses on derivatives their own figures say 1.27% NIM, minus 46 basis point in derivatives losses, that is 79 basis point NIM.<br /><br />FRE for some reason seams to have much higher NIM. Almost unimaginable.<br /><br />I'm not aware of the exact way FNM account for NPL's forgone revenues, on what line in the P/L they account for losses. If they account for these losses in the NIM, the much higher NPL's could be the reason FRE has much higher NIM, but if the account for losses, on another line, I'm very puzzled by this huge difference in NIM between FRE and FNM.<br /><br />Have you looked into this difference?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-74114881337053076752009-08-18T05:29:04.537+10:002009-08-18T05:29:04.537+10:00The GSE market is different because the Fed is pur...The GSE market is different because the Fed is purchasing securities there. I have been looking, very closely. Look where GSE spreads are vs bank spreads. And read FNM/FRE statements which say their positive income is mainly due to low funding costs.RAnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-52177368174487643152009-08-18T05:15:24.310+10:002009-08-18T05:15:24.310+10:00I realise that the margins of banks and GSEs that ...I realise that the margins of banks and GSEs that have access to the quasi government guarantee have massively rising revenue.<br /><br />That applies to Bank of America and to Fannie and Freddie.<br /><br />The issue is that the things that kept the margin low - competition from AAA rated securitisation product - have gone away.<br /><br />As of course has the AAA on that product.<br /><br />---<br /><br />Still you have to observe that pre-tax, pre-provision income is going gangbusters.<br /><br />And if you think that any big bank is without contingent government guarantee you have not been looking. that is the lesson of this crisis.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-35551236496182041782009-08-18T05:05:37.389+10:002009-08-18T05:05:37.389+10:00Keep in mind that a good amount of recent NIM gain...Keep in mind that a good amount of recent NIM gains is due to the very low level of funding costs, which in turn is due to Fed buying and the strengthening of the quasi govt guarantee. I am not sure that either of these forces are sustainable if the companies were to be completely private in the future.RAnoreply@blogger.com