Fannie Mae and Freddie Mac's fixed-income arbitrage activity is a highly-levered, hedge-fund-like business.

This is a characterisation, judged as of May 2014 (and on the period it describes, before conservatorship). True: the evidence shows that Fannie Mae and Freddie Mac's retained-portfolio ("fixed-income arbitrage") business consisted of buying mortgages and MBS funded largely with debt at their low implied-guarantee borrowing cost, earning the spread, with high leverage (thin capital relative to assets, for example capital of a few percent or less of portfolio assets). Sources would be their filings, FHFA, Treasury, the Fed or GAO, or independent analysts who describe it in comparable terms (as a carry, arbitrage or hedge-fund-like activity). Mostly true: the activity was substantially as described but the evidence shows its leverage was moderate rather than high, or by 2014 the portfolios had largely been wound down under conservatorship caps, so the description fits mainly the earlier period. Mixed: credible sources dispute the description on substantive grounds roughly as much as they support it. Mostly false: the business was a spread business but not highly levered or not comparable to a hedge fund in any meaningful sense. False: the GSEs did not run a materially leveraged, debt-funded investment portfolio.

Set before the research began.

1. E1 Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance Acharya, Richardson, Van Nieuwerburgh and White (NYU Stern); hosted by St. Louis Fed · January 2011

   “With respect to (ii), the GSEs were to hold 2.50% capital against their balance sheet assets (of which mortgages are by far the largest category).”

2. E2 Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance Acharya, Richardson, Van Nieuwerburgh and White (NYU Stern); hosted by St. Louis Fed · January 2011

   “Over this period, the GSE leverage ratios generally ranged between values of 20 to 40 whereas the commercial banking sector had ratios of 10 to 15.”

3. E3 Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance Acharya, Richardson, Van Nieuwerburgh and White (NYU Stern); hosted by St. Louis Fed · January 2011

   “Rather than making markets more liquid, it had as its true objective to make money for the shareholders, traders, and CEOs of the GSEs, just as is true of any other hedge fund.”

4. E4 Fannie, Freddie, and the Crisis National Affairs

   “The investment portfolios actually generated a cumulative net profit of $13 billion over the same period.”

The NYU Stern analysis hosted by the St. Louis Fed reports that the GSEs had to hold 2.50% capital against their balance-sheet assets (E1). It also puts their leverage ratios at 20 to 40, against 10 to 15 for commercial banks (E2). The same source says the portfolio business existed to make money for shareholders, traders and CEOs, "just as is true of any other hedge fund" (E3). That is independent support for both the high-leverage part and the hedge-fund comparison. E4 shows the portfolios made a cumulative profit, which fits a spread business and does not contradict the description.