Fannie Mae and Jane Austen’s “Persuasion”
Fannie Mae has canceled plans to take a large amount of office space in southwest Washington, DC that, according to the Post:
was more than a real estate deal. It was also meant as a symbolic gesture to show its corporate commitment to revitalizing American communities.
City planners viewed Fannie’s arrival in Southwest as a linchpin, along with a planned baseball stadium on nearby
In making the move, Fannie Mae cited its capitalization challenges:
“The decision is one of several actions Fannie Mae has taken to reduce future costs in order to accelerate the increase in the company’s capital,” Fannie spokesman Charles V. Greener said in a statement.
The Post adds this snapshot of Fannie Mae’s core capital requirement:
Based on a snapshot of Fannie’s financial condition that OFHEO had issued as of Sept. 30, Fannie had $28.9 billion of core capital after adjusting for the hit to earnings, and it was required to have $31.8 billion. Adding the 30 percent surplus requirement left Fannie about $12.5 billion in the hole.
To fill that gap, Fannie recently sold $5 billion of preferred stock and cut its first-quarter dividend in half, a move that will save the company about a quarter of a billion dollars.
This puts me in mind of the early scenes of Jane Austen’s Persuasion:
Lady Russell was most anxiously zealous on the subject, and gave it much serious consideration. … She was of strict integrity herself, with a delicate sense of honour; but she was as desirous of saving Sir Walter`s feelings, as solicitous for the credit of the family, as aristocratic in her ideas of what was due to them, as anybody of sense and honesty could well be.
They must retrench; that did not admit of a doubt. But she was very anxious to have it done with the least possible pain. She drew up plans of economy, she made exact calculations. [Anne] wanted more vigorous measures, a more complete reformation, a quicker release from debt, a much higher tone of indifference for everything but justice and equity.
“If we can persuade your father to all this,” said Lady Russell, looking over her paper, “much may be done. If he will adopt these regulations, in seven years he will be clear; and I hope we may be able to convince him and Elizabeth, that Kellynch Hall has a respectability in itself which cannot be affected by these reductions.”
