Fannie Mae's Trust Fund Troubles

There's no disputing anymore that Fannie Mae (FNM Quote) will have to recognize huge losses that were previously kept out of earnings and that its financial statements are a terrible mess.

But there are indications that the mortgage giant's bookkeeping was so badly done that it could end up having to bring huge amounts of assets onto its balance sheet as part of a cleanup of its financial statements.

And any large-scale transferal of assets onto its balance sheet would be a nightmare for Fannie, because it could be extremely expensive to carry out, take many months to execute and, in a worst-case scenario, leave the government-sponsored company severely undercapitalized. ...