Last week, we analyzed Fannie and Freddie’s 2Q earnings, cautioning that, while better, the news was still not good because GSE earnings relied on models that permit significant credit-provision reductions.  Clients have asked us if FHFA should have blocked the reserve reductions, a question we address here due to its importance not just to the GSEs’ outlook, but also the continuing quandary created by the conservatorships.

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