Good Earnings are Hard to Find
The GSEs’ 1Q earnings validate our assessment of the 2013 results:  Fannie and Freddie cannot sustain big pay-outs to Treasury over time because sustainable earnings are not the bonanzas reflected in last year’s big checks. To be sure, the GSEs remained profitable in the first quarter – higher g-fees were critical drivers despite volume drops. But, viewed as private guarantors, there’s no there there because the GSEs are unable to build the capital any viable successor without an “effective” USG backstop would have to have for market credibility and regulatory resilience.

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