Early Briefing: Fannie's Pursuit of Subprime
In January 2007, as years of loose mortgage lending were about to send the nation's housing market into devastating decline, Fannie Mae chief executive Daniel H. Mudd wrote a confidential memo to his board.
Discussing the company's successes, Mudd said one of Fannie Mae's achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step "toward optimizing our business."
A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.
Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.
Since then, Fannie Mae's exposure to loosely underwritten mortgages has produced billions of dollars of losses and sent its stock price plummeting, prompting the federal government to prepare for a potential taxpayer bailout of the company. This month, Fannie Mae reported that loans from 2006 and 2007 accounted for almost 60 percent of its second-quarter credit losses.
Fannie Mae documents from the period, obtained by The Washington Post, paint a picture of a company with the dual incentives of fostering affordable housing and making money, and of one caught between the imperatives of increasing its market share while avoiding excessive risk. In a bid to juggle these demands, the company's executives took on risks they either misunderstood or unduly minimized.
See staff writer David S. Hilzenrath's full account here.
* Orbital Sciences of Dulles said it successfully launched its AMC-21 satellite into space on Aug. 14 and tests over the weekend show that it is operating as planned. The satellite was built for SES Americom to provide broadcast television and mobile broadband services to the United States, southern Canada, Mexico, the Caribbean and Central America.
* Dulles International Airport officials Monday showed off a new fleet of rail cars that eventually will replace the airport's 1960s-era "mobile lounges" that transport passengers to gates.
The AeroTrain system has 29 electric rail cars that run on rubber wheels on flat concrete rails. It will go into service late next year.
* Virginia Gov. Timothy M. Kaine's administration has achieved one of its top goals -- buying 40 percent of all state products and services from small, women- and minority-owned businesses.
But a Washington Post review of the state program designed to help such businesses secure government work shows that a vast majority of the 15,800 participating companies are small businesses owned by white men, a fifth are outside the state and an untold number have failed to receive any state contracts.
Critics, including state legislators and business owners, said the program does not work as intended.
* Some opponents of a 65-mile power line planned for Northern Virginia, including a congressman, are criticizing Gov. Timothy M. Kaine's choice to fill a vacancy on a state commission that oversees utilities.
Last week, Kaine (D) named Richmond lawyer James C. Dimitri to the three-judge State Corporation Commission to replace Theodore V. Morrison Jr., who retired.
Dimitri, taking his seat on the commission with a temporary appointment, will serve a full six-year term if he wins confirmation from the legislature early next year.
Kaine's choice drew outrage in some quarters because Dimitri has been representing Dominion Virginia Power in its effort to gain commission approval for the controversial line from Frederick County, Va., to Loudoun County.
Rep. Frank R. Wolf (R-Va.), a prominent opponent of the line, said yesterday that he was "shocked and angered," adding, "It's a conflict of interest, and [his name] ought to be withdrawn. . . . Couldn't they find an objective person?"
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Posted by: mlimberg | August 19, 2008 7:46 PM
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