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ALL IN 

Mudd responded, “My experience is that email is not a very good venue for con-
versation, venting or negotiating.” If Dallavecchia felt that he had been dealt with in
bad faith, he should “address it man to man,” unless he wanted Mudd “to be the one
to carry messages for you to your peers.” Mudd concluded, “Please come and see me
today face to face.”  Dallavecchia told the FCIC that when he wrote this email he
was tired and upset, and that the view it expressed was more extreme than what he
thought at the time.  Fannie, after continuing to purchase and guarantee higher-risk
mortgages in , would report a . billion net loss for the year, caused by credit
losses. In , Mudd’s compensation totaled . million and Levin’s totaled
 million.
In , Freddie Mac also persisted in increasing purchases of riskier loans. A
strategic plan from March highlighted “pressure on the franchise” and the “risk of
falling below our return aspirations.”  The company would try to improve earnings
by entering adjacent markets: “Freddie Mac has competitive advantages over non-
GSE participants in nonprime,” the strategy document explained. “We have an op-
portunity to expand into markets we have missed—Subprime and Alt-A.”  It took
that opportunity. As OFHEO would note in its  examination report, Freddie
purchased and guaranteed loans originated in  and  with higher-risk char-
acteristics, including interest-only loans, loans with FICO scores less than , loans
with higher loan-to-value ratios, loans with high debt-to-income ratios, and loans
without full documentation. Financial results in  were poor: a . billion net
loss driven by credit losses. The value of the  billion subprime and Alt-A private-
label securities book suffered a  billion decline in market value.  In , Syron’s
compensation totaled . million and McQuade’s totaled . million.

Affordable housing goals: “GSEs cried bloody murder forever”

As discussed earlier, beginning in , the Department of Housing and Urban Devel-
opment (HUD) periodically set goals for the GSEs related to increasing homeowner-
ship among low- and moderate-income borrowers and borrowers in underserved
areas. Until , these goals were based on the fraction of the total mortgage market
made up of low- and moderate-income families. The goals were intended to be only a
modest reach beyond the mortgages that the GSEs would normally purchase. 
From  to ,  of GSE purchases were required to meet goals for low-
and moderate-income borrowers. In , the goal was raised to .  Mudd said
that as long as the goals remained below half of the GSEs’ lending, loans made in the
normal course of business would satisfy the goals: “What comes in the door through
the natural course of business will tend to match the market, and therefore will tend
to meet the goals.”  Levin told the FCIC that “there was a great deal of business that
came through normal channels that met goals” and that most of the loans that satis-
fied the goals “would have been made anyway.” 
In  HUD announced that starting in ,  of the GSEs’ purchases would
need to satisfy the low- and moderate-income goals. The targets would reach  in
 and  in .  Given the dramatic growth in the number of riskier loans