Fannie Mae may need more than the $100 billion in funding pledged by the U.S. Treasury to stay afloat after reporting a record $29 billion loss and confronting more difficulty in issuing and refinancing debt.
“This commitment may not be sufficient to keep us in solvent condition or from being placed into receivership,” if there are further “substantial” losses or if the company is unable to sell unsecured debt, Washington-based Fannie said in a filing today with the U.S. Securities and Exchange Commission.
Fannie said it has a limited ability to issue debt maturing past one year, citing market conditions, the lack of an explicit federal guarantee and competition from government-insured bank bonds. Fannie, which along with Freddie Mac was seized by regulators on Sept. 6, slashed the value of its assets by at least $21.4 billion for the third quarter and increased credit loss reserves by 75 percent to $15.6 billion. Freddie is required to file its quarterly earnings by the end of the week.
Before long, all debt will be backed by the Federal Government.