Fannie Mae 2009 Annual Report Download - page 140

Table 36: Cash and Other Investments Portfolio
2009 2008 2007
As of December 31,
(Dollars in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,812 $17,933 $ 3,941
Federal funds sold and securities purchased under agreements to resell . . . . . . . . . . . . . . 53,684 57,418 49,041
Non-mortgage-related securities:
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,515 10,598 15,511
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364 6,037 13,515
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1,005 9,089
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $69,378 $92,991 $91,097
We have maintained a significant amount of liquidity during 2009, as required by FHFA. Our cash and other
investments portfolio decreased from 2008 levels due to the reduction in our short-term debt balances, which
reduced the amount of cash we needed on hand as of December 31, 2009 to repay maturing short-term debt.
As described in “Debt Funding Activity,” due to the improved demand and attractive pricing for our non-
callable and callable long-term debt, we issued a significant amount of long-term debt and reduced the
proportion of our short-term debt as a percentage of our total debt in 2009; and that trend has continued
through the date of this filing.
We no longer purchase corporate debt securities or asset-backed securities with a maturity of greater than one
year for liquidity purposes, because we determined that we could not rely on our ability to sell these securities
when we needed liquidity. We make sales from our remaining inventory of these securities from time to time
as market conditions permit or allow them to mature, depending on which we believe will deliver a better
economic return. During 2009, the amount of these securities we held was reduced by $7.8 billion due to the
sale or maturity of the securities. Approximately $8.9 billion of our cash and other investments portfolio as of
December 31, 2009 consisted of these securities. There can be no assurance that we could liquidate these
assets if and when we need access to liquidity. The remaining $60.5 billion of our cash and other investments
portfolio as of December 31, 2009 consisted of cash and cash equivalents and short-term (less than three
months to maturity), liquid investments such as federal funds, repurchase agreements, short-term bank deposits
and bank certificates of deposit. In the fourth quarter of 2009, in an effort to enhance our liquidity position,
FHFA directed us to diversify our cash and other investment portfolio to include U.S. Treasury Bills, which
we began purchasing in January 2010.
See “Risk Management—Credit Risk Management—Institutional Counterparty Credit Risk Management—
Issuers of Securities Held in our Cash and Other Investments Portfolio” for additional information on the risks
associated with the assets in our cash and other investments portfolio.
Unencumbered Mortgage Portfolio
Another source of liquidity in the event our access to the unsecured debt market becomes impaired is the
unencumbered mortgage assets in our mortgage portfolio, which could be used as collateral for secured
borrowing.
During 2009, we made enhancements to our systems to facilitate the securitization of a significant portion of
the single-family whole loans in our mortgage portfolio into Fannie Mae MBS. In 2009, we securitized
approximately $94.6 billion of whole loans held for investment in our mortgage portfolio into Fannie Mae
MBS. These mortgage-related securities could be used as collateral in repurchase agreements or other lending
arrangements. Despite these enhancements to our systems, we do not have the capability to securitize all of
the single-family whole loans in our unencumbered mortgage portfolio. See “Risk Management—Operational
Risk Management” for a description of the limitations of, and risks associated with, our systems.
We believe that the amount of mortgage-related securities that we could successfully borrow against in the
event of a liquidity crisis or significant market disruption is substantially lower than the amount of mortgage-
related securities we hold. Due to the large size of our portfolio of mortgage-related securities and current
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