Fannie Mae Posts Profit? 25


fannie mae profits lossesProfit is a funny thing. If you look per day, a company can look like it’s doing great, depending on what day you pick. Let’s try expanding to a whole week, then how does the company look? Then try monthly or quarterly. Does the profit still show up? Don’t even bother with yearly, you may not like what you find. So you see it’s really a question of how closely you care to look.

So if all that’s clear to you I think you want to keep your eyes shut when you hear about Fannie Mae. You might be shocked at first: Fannie Mae turned a profit of $73 million at the end of 2010. (Don’t ask if the taxpayers are going to see any of that!) That must be exciting news and a sign of a tremendous turn around in the housing market. Well, if you’re thinking like that, cancel the parade and get back under your bed.

Because if you take the year as a whole, they’re down $14 billion. Oh, and add that to $72 billion for 2009. So you might find it funny that Fannie Mae has begun to pull itself out of the whole yet talk is ramping up about how to dismantle the organization. All you need to do is remember how pitifully they weathered the last few years, the massive losses they forced on us, and it’ll suddenly become clear why it’s time to pull the plug.

A lot of what’s going on (called too little, too late) is trying to better evaluate risk. Mortgage financing companies are looking to see where they’ve been going wrong and trying to figure out how to cut losses and still turn a profit. This last ditch effort won’t go far enough, and anyone who can understand risks knows the higher the risk, the bigger the gain. So while Fannie cashed in when the going was good, they’re trying to back out and cut their losses. It sounds more like cutting off the arm to spite the hand.

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