The big reason that Hank Paulson pushed a government takeover of Fannie Mae and Freddie Mac is that he concluded, after Morgan Stanley scrubbed their accounting, that the $84 billion in capital stated on their books was really worth $50 billion less. This made me wonder what would happen to the capital of other big banks if they took a similar 60% haircut.
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Reactions to Fannie/Freddie haircut would wipe out $372 billion in big bank capital
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