The Fannie, Freddie Debacle

Excellent commentary that you wrote in this month's U.S. Banker about GSEs. When talking about GSEs morphing from government-sponsored "New Deal" entities with a societal mission to profit-first and foremost-institutional behemoths, let's not forget about the Farm Credit System and how it has abandoned its original mission to provide family farmers with loans for the sake of growth, profit and big paychecks to the top CEOs. Fannie and Freddie aren't just a direct huge "margin call" cost to the taxpayer; it's also about the huge loss of tax revenues to our deficit-burdened federal government that GSEs siphon out of the system when they take profits away from the private sector.

James E. Mack


Pine Island Bank, Pine Island, MN

Editor Responds:

Thank you for your insight regarding USB's August commentary ("America's Big Margin Call: Paying for Freddie, Fannie"). Paulson's plan is but a band aid for this mess; what happens next will be telling. We'll see-and I'll be writing. Stay tuned.

Commercial Real Estate Snafu

In response to U.S. Banker's story titled "The Other Shoe" (August 2008), I wanted to clarify and correct several inaccuracies.

In the piece, John Engen quotes Mark Fitzgibbon at Sandler O'Neill, who incorrectly states that Washington Mutual has "heavy exposure to the subprime and construction lending [markets]."

In fact, Washington Mutual does not lend to housing developers and exited the Home Builder Finance business almost four years ago. Further, while construction loan balances are not reported separately in the company's financial statements, they are quite small and are included in the "other commercial" category of loans, which itself represents only five percent of WaMu total loans as of June 30, 2008.

Additionally, to further contrast Mr. Fitzgibbon's assertions, net income in our Commercial Group increased in the second quarter, and the group continued to experience strong credit trends, increased loan volumes and increased loan balances. Thus, to insinuate that Washington Mutual is "struggling with CRE" misstates the facts.

Brad Russell

VP and Manager, Corporate

Positioning and Responsibility

Washington Mutual

Editor Responds:

While Washington Mutual and other players have been challenged during the credit crisis, the magazine incorrectly reported WaMu's exposure to construction lending. USB regrets the error.(c) 2008 U.S. Banker and SourceMedia, Inc. All Rights Reserved.

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