In 1968, the Federal National Mortgage Association was partitioned into two separate entities - one wholly owned by the government and known as the Government National Mortgage Association (Ginnie Mae), and the other to retain the name Federal National Mortgage Association (Fannie Mae). At this time Fannie Mae expanded its charter to buying other sorts of mortgages besides the government insured ones it had traditionally purchased.

Today, Fannie Mae is a consistently profitable American corporation. It receives no direct government funding or backing. However, it has certain looser restrictions placed on its activities then normal financial institutions. For example, it is allowed to sell mortgage backed securities with half the capital backing them up then is required by other financial institutions. Critics say that this is only allowed because investors seem to think that there is a hidden, or implied, garuntee to the bonds that Fannie Mae sells. Although the company describes them as haveing no garuntee, nevertheless the vast majority of investors believe that the Government would prevent them from defaulting on their debt, and so buy bonds that are very low interest rates compared to the risk.

External links

• Fannie Mae homepage.