With the Securities & Exchange Commission ruling that Fannie Mae must restate its earnings for the past four years, Credit Suisse First Boston reports that the GSE may be compelled to cease growing its portfolio, as well as sell MBS to address this capital gap, possibly that the MBS market might have to digest an additional $104 billion in MBS in the first half of 2005.

Fannie's 2% portfolio growth rate through October on a $913 billion portfolio is probably going to be the "first casualty." This leads to an annualized $18 billion or $9 billion in six months of demand exiting the market.

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