2010 Financial Report of the United States Government
“Increasingly difficult conditions in the housing market challenged the soundness and profitability of Fannie Mae and Freddie Mac, thereby undermining the entire housing market. This led Congress to pass the Housing and Economic Recovery Act of 2008 (HERA). This Act created the new Federal Housing Finance Agency (FHFA), with enhanced regulatory authority over the GSEs, and provided the Secretary of the Treasury with certain authorities intended to ensure the financial stability of the GSEs, if necessary.
On September 7, 2008, FHFA placed the GSEs under conservatorship and Treasury entered into a Senior Preferred Stock Purchase Agreement (SPSPA) with each GSE. These actions were taken to preserve the GSEs’ assets, ensure a sound and solvent financial condition, and mitigate systemic risks that contributed to current market instability. The actions taken by Treasury are temporary, and are intended to provide financial stability until Fannie Mae and Freddie Mac can return to normal operations or until the Administration and Congress address how they should be structured going forward. As of September 30, 2010, there are no plans to bring these organizations into the government. The FHFA director may terminate the conservatorship if safe and solvent conditions can be established. Per SFFAC No. 2, Entity and Display, these entities meet the criteria of “bailed out” entities under paragraph 50. Accordingly, the Federal Government has not consolidated them into the financial statements, but included disclosure of the relationship(s) with the entities and any actual or potential material costs or liabilities in the consolidated financial statements.”