We have reviewed Fannie’s 2Q earnings and confirmed that the GSE’s positive results, like Freddie’s, largely depend on models that anticipate house-price appreciation and, thus, reduced loss severity. Some have suggested that these upbeat earnings mean the heat’s off GSE reform.  This we doubt not only because the earnings, as Fannie makes more than clear, may not last.  And, even if they do, there’s still the $150 billion or so due the taxpayers that can’t be recovered absent statutory reform.  Maybe bygones can be foregone, but we doubt it.

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