Mortgage Scene: Framing the GSE Debate in the New Bush Administration.

Is the new Bush Administration "pro" Fannie and Freddie or is it "anti" GSE? Good question. Unfortunately, if you're trying to read the early tea leaves the jury is still out, even though Treasury secretary Paul O'Neill hinted in a recent interview that he feels the two government-sponsored enterprises don't necessarily receive a Federal subsidy.

To boot, Mr. O'Neill appears to be an old friend of Fannie Mae chairman Franklin Raines, a relationship that does not portend an easy year for Mike House and his mortgage insurance and commercial banking friends who are backing FM Watch, the GSE

"watch dog" group.

In an interview with Bloomberg News, Mr. O'Neill (who comes to the government from Alcoa, not exactly a mortgage shop) expressed a lack of knowledge about Fannie and Freddie's market share. Then again, so did Bloomberg News. When Mr. O'Neill asked the news organization what the GSE market share was, a Bloomberg reporter (according to a transcript provided by Morgan Stanley) said: "I think they say it's around 10%."

Ten percent of what? Here's some facts for Mr. O'Neill and the youngsters at Bloomberg: In 2000 Fannie Mae purchased $365 billion in residential loans, a year in which total loan production was $1 trillion. Freddie Mac purchased $166 billion. When measured by purchases, that means Fannie Mae had a 36.5% market share and Freddie 16.6%. Together they purchased 53.1% of all originations in 2000.

If you look at their portfolio holdings, Fannie Mae held $592 billion in single family mortgages at year-end, Freddie Mac, $385 billion. Together they hold on their books (which do not include guaranteed MBS held by others) $977 billion of the $5 trillion in outstanding residential debt in the U.S. Their ...