So basically we are being asked to believe that impaired "conforming" mortgages are neither on the banks' balance sheets nor on the federal government's -- even though the banks are relying on the Fannie/Freddie backstopping to avoid consolidating these assets. Nice trick. We have trillions in loans officially in no-man's land.

One reason for the giant difference is that “conforming” mortgages comprise a bit over half of Wells’ off balance sheet assets. These are eligible for a government guarantee via Fannie Mae, Freddie Mac, or Ginnie Mae, argues the bank, so it needn’t consolidate them since they pose no risk to its balance sheet.

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