On the top of the presidential election marketing campaign, the Treasury Division issued a press launch known as “Additional Steps to Expedite Wind Down of Fannie Mae and Freddie Mac.” It highlighted a brand new coverage to reduce the pair’s mortgage-investment portfolio at a fee of 15% per 12 months, versus their said 10% fee. Reviews from the Securities and Change Fee, nonetheless, recommend that these two government-sponsored enterprises—at present beneath federal conservatorship—will not be shrinking a lot in any respect.

The Treasury announcement, coming close to the fourth anniversary of the September 2008 authorities takeover of the mortgage behemoths, was made throughout an election marketing campaign with a heavy give attention to the well being of the financial system. The impression it left was that the costliest of the 2008 bailouts was not a lot of a difficulty, because the transition again to stability within the mortgage market is effectively beneath approach.

We’ve since realized that the mortgage market continues to be troubled—given the report on Friday that the Federal Housing Administration, a authorities company, faces excessive losses on its mortgage loans and should must get billions from the U.S. Treasury to shore up its funds.

Forbes journal referred to the August Treasury announcement as “Obama’s Victory Lap.” Fannie and Freddie’s caretaker and regulator, the Federal Housing Finance Company, chimed in that the “quicker discount within the retained mortgage portfolio will additional cut back danger publicity and simplify the operations of Fannie Mae and Freddie Mac.”

However these feedback elevate questions whenever you cross-check the claims towards the annual and quarterly reviews, Kinds 10-Ok and 10-Q, that Fannie Mae filed with the SEC.

Fannie Mae, by far the bigger of the 2 establishments, has a mortgage stability that has hovered at $2.9 trillion since early 2010, the reviews present. Freddie Mac has managed to shrink its mortgages, however solely barely.

Precisely what 10% wind-down fee was the Treasury Division referring to in its press launch? As soon as once more, the SEC reviews for Fannie are useful as they clarify the premise for a few of the feedback: “The senior most popular inventory buy settlement with Treasury contains numerous covenants that considerably prohibit our enterprise actions . . . the utmost allowable quantity of mortgage belongings [Fannie Mae was] permitted to personal on December 31, 2011 was $729 billion.”

In different phrases, when Treasury bailed out Fannie and Freddie, a part of that deal was a cap on the mortgage belongings they might “personal.” This cover has gone down 10% per 12 months and can now go down 15%. At the least in principle, this mandate may result in sustained shrinkage within the belongings and general presence of Fannie and Freddie.

However the said cap for “owned” belongings, $729 billion in Fannie’s case, represents solely a small portion of the $2.9 trillion in mortgages on Fannie’s stability sheet.

Fannie and Freddie have an excessive amount of danger publicity from “guaranteeing” mortgages. Measured as a proportion of Fannie’s whole mortgage belongings, owned belongings characterize solely just a little greater than 25%, whereas the majority of its whole mortgage loans fall into the class of loans it ensures.

Treasury additionally failed to say workers ranges in its announcement.

Certainly Fannie and Freddie are beginning to rationalize and cut back their far-flung operations as absolutely personal establishments after 4 years in authorities palms. They have been positioned in a authorized conservatorship, in any case; so what higher strategy to preserve sources than to cut back excesses in payroll—particularly when one considers Fannie’s $16.9 billion web loss final 12 months?

“Fannie Mae Laying Off A whole lot,” learn a Washington Submit headline from early 2009, a number of months after the federal government takeover. The headline centered on the Washington, D.C., workplace. Elsewhere, the article famous that Fannie’s Dallas workplace was hiring, and general staffing ranges have been anticipated to stay flat. As soon as once more, cross-checking the SEC reviews undermines any doomsday narrative about workers shrinkage.

Fannie Mae had 5,800 staff in late 2008, shortly after the federal government takeover. As of early 2012 it had bulked as much as 7,000 staff. This was down from a peak of seven,300 staff in 2011, however nonetheless up 1,200 because the begin of presidency conservatorship. Once more, Freddie Mac has managed to cut back workers barely, however the quantity—about 90 whole—pales compared to the 1,200-employee bump at Fannie.

These information expose the Treasury announcement as deceptive at finest, and make sure that the wind-down mission has not been completed.

Actually, the efforts so far don’t deserve a victory lap, though Freddie Mac has made modest progress, which is greater than could be stated for Fannie Mae. If Treasury desires to trumpet shrinkage, Fannie and Freddie must downsize their whole mortgage portfolio, owned and assured, and reduce their military of staff.

Then, maybe, a victory lap could be applicable.