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508 Dissenting Statement

little fl exibility to compete by lowering its G-fees. Its net income and its return on
equity were all declining quickly during this period, and a cut in its G-fees would
have hastened this decline.
Finally, there are Fannie’s own reports about its acquisitions of subprime
loans. According to Fannie’s 10-K reports for 2004 (which, as restated, covered
periods through 2006) and 2007, Fannie’s acquisition of subprime loans barely
increased from 2004 through 2007. Th ese are the numbers:
Table 9. Fannie Mae’s Acquisition of Subprime Loans, 2004-2007
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2004 2005 2006 2007
FICO <620 5% 5% 6% 6%
FICO 620-<660 11% 11% 11% 12%
Th ese percentages are consistent with Fannie’s eff ort to comply with the
gradual increase in the AH goals during the years 2004 through 2007; they are
not consistent with an eff ort to substantially increase its purchases of subprime
mortgages in order to compete with fi rms like Countrywide that were growing their
market share through securitizing subprime and other loans.
Finally, Fannie’s 2005 10-K (which, as restated and fi led in May 2007,
also covered 2005 and 2006), contains a statement similar to that made in 2006,
confi rming that the GSE made no eff ort to compete for subprime loans (except as
necessary to meet the AH goals), and that in fact it lost market share by declining to
do so in 2004, 2005 and 2006:
[I]n recent years, an increasing proportion of single-family mortgage loan originations
has consisted of non-traditional mortgages such as interest-only mortgages, negative-
amortizing mortgages and sub-prime mortgages, and demand for traditional 30-year
fi xed-rate mortgages has decreased. We did not participate in large amounts of these
non-traditional mortgages in 2004, 2005 and 2006 because we determined that the
pricing off ered for these mortgages oft en off ered insuffi cient compensation for the
additional credit risk associated with these mortgages. Th ese trends and our decision
not to participate in large amounts of these non-traditional mortgages contributed to a
signifi cant loss in our share of new single-family mortgages-related securities issuances to
private-label issuers during this period, with our market share decreasing from 45.0% in
112
2003 to 29.2% in 2004, 23.5% in 2005 and 23.7 in 2006. [emphasis supplied]
Accordingly, despite losing market share to Countrywide and others in 2004,
2005 and 2006, Fannie did not attempt to acquire unusual numbers of subprime
loans in order to regain this share. Instead, it continued to acquire only the subprime
and other NTM loans that were necessary to meet the AH goals. Th at the AH goals
were Fannie’s sole motive for acquiring NTMs is shown by the fi rm’s actions aft er
the PMBS market collapsed in 2007. At that point, Fannie’s market share began to
rise as Countrywide and others could not continue to issue PMBS. Nevertheless,
despite the losses on subprime loans that were beginning to show up in the markets,
Fannie continued to buy NTMs until they were taken over by the government in

111 Fannie Mae, 2004 10-K. Th ese totals do not include Fannie’s purchases of subprime PMBS.
http://www.fanniemae.com/ir/pdf/sec/2004/2004_form10K.pdf;jsessionid=N3RRJCZPD5SOVJ2FQSH
SFGI, p.141 and Fannie’s 2007 10-K, http://www.fanniemae.com/ir/pdf/sec/2008/form10k_022708.pdf
;jsessionid=N3RRJCZPD5SOVJ2FQSHSFGI, p.127.
112 Fannie Mae, 2005 10-K, p.37.