Comment

I just want to thank all the minions at FHFA as well as those over at Treasury, as y'all have taught me the true meaning of the Fanniegate Blues and caused me to sing the GSE Ballad, including this here one with lyrics by none other than that ol' Tim Howard hisself...  Even if you don't like the presentation,  y'all can still read what he had to say below [with only a tiny  bit of uh artistic license applied] Go on, click on that there link and give it a listen, I bet you dasn't:

THE GSE-MOJI MOVIE

https://www.youtube.com/watch?v=bl6voEoQ9WQ

Scherzo in B# for Fannie Mae & Freddie Mac

I don’t understand the contention 
That Fannie and Freddie will need a government guaranty 
On their securities in the future to provide the same sort of support 
In the secondary market as they have in the past…

If FHFA sets a true risk-based Treasury endorsed capital requirement for them
Designed to withstand a defined stress environment
[Spoken; “say a 25 percent decline in home prices over a 5-year period”]
That should give investors enough confidence in the quality of Fannie and Freddie’s guarantees 
To enable the companies to issue very large volumes of MBS that trade at levels close to Ginnie Mae securities….

If for some reason that doesn’t happen
The companies should be able to respond 
By getting catastrophic loss reinsurance
At a relatively low cost (which would be passed on to homebuyers)…

Insistence by many mortgage analysts and also FHFA Director Watt
That the resolution of the GSE conservatorships must involve Congress 
Is a legacy of the earliest days of the mortgage reform dialogue, when Company opponents falsely blamed them for the 2008 mortgage and Financial crises. We now know that is not true…

Fannie and Freddie weren’t “rescued and bailed out;” they were “seized and decapped”
Taken over at the initiative of Treasury against their will and without statutory authority
Stripped of their capital by accounting entries booked by FHFA that temporarily or artificially ballooned their expenses 
And forced them to take huge amounts of unneeded but non-repayable senior preferred stock from Treasury…

While the appropriate response to a rescue and bailout might be legislation 
Designed to remedy defects and weaknesses of the previous system, 
The correct way to unwind an instance of “seize and decap” is to 
Do the reverse that is, to “recap and release”… 

Recap and release, however, has become a verboten phrase
 [Spoken: “it’s not “real reform”]
The closest thing to it that is still on the table is administrative reform
Which is not just the best alternative but also
Given the current dysfunction in Congress, the only one
With a realistic chance of being implemented…

Fannie and Freddie should be subject to utility-like regulation
Including regulation on the prices they can charge for their credit guarantees. 
In exchange for that regulation, though, they should be allowed to keep the benefits conveyed to them in their existing charters.

The combination of utility-like regulation and open competition
As recommended by the MBA, is both internally inconsistent and unwise as public policy….