Fannie/Freddie: Big hole

The feeble regulator of Fannie Mae and Freddie Mac has long allowed them to get away with having too little capital. If Treasury secretary Hank Paulson wants to strengthen the US mortgage finance giants enough so they can hold their own without further government backing, he might have to inject some $200bn or more. The book value of shareholders’ equity - common and preferred stock - for Fannie was about $41bn at mid-year. For Freddie, carrying an accounting loss, the equivalent figure was $13...