Follow this link to the AP story run in the Worcester T & G on April 10, 2010.

This story was the subject of a misinformed letter to the editor published on May 4, 2010.

My response to the letter was:

You can depend on the AP’s unbalanced summary of Daniel Mudd’s testimony, you could depend on my unbalanced selection of quotes, or you could read his prepared remarks in their entirety at http://fcic.gov/hearings/pdfs/2010-0409-Mudd.pdf.

Here is my selection of quotes.

Maintaining the delicate balance between profitability as a private company and service to the public mission became impossible.

The GSE’s role in the housing market is not to originate mortgages – their role is to acquire mortgages originated by others in order to provide liquidity, increase stability, and to assist in providing affordable housing to the American people.

That balance included a fiduciary responsibility to our investors – the shareholders to whom the government sold Fannie Mae in 1972 …

… Fannie Mae’s market share fell from its historical level of approximately 40% to nearly 20%, as the private sector including banks, Wall Street and mortgage specialists entered the market.

How could an entity whose market share was cut in half be the cause of the problem?

Fannie Mae did not accept every type of mortgage that was originated by the market. Wall Street and other private subprime and Alt-A mortgages have default rates that have significantly exceeded those of Fannie Mae-guaranteed subprime and Alt-A loans.

Perhaps we should have gone to the government and gotten a clear answer to the question: Do you want more capital or more lending?

The GSE’s were asked to take a lead in providing modifications. They were asked to provide warehouse loans by lenders who had previously screamed ‘foul’ at the idea of Fannie or Freddie entering the market.

The story is more complex than I have been saying (or the AP has been saying), so it does pay to read the entire testimony.