Fannie Mae-No Politics (FNMA)

[kthomp19]

Be careful here. Calabria said here that FHFA and Treasury screwed up, and that they violate standard conservatorship practices.

However, his words could easily be construed to mean "FHFA and Treasury screwed up, they should have just put the companies into receivership in the first place". Calabria has said in many places that he thinks FnF should have been put in receivership and that the government should not be essentially sponsoring the 30-year fixed-rate mortgage.

Calabria would have many legal ways to put the companies into receivership, and none of them have anything to do with the companies' profitability. Whatever companies would succeed FnF would have to keep the charters by HERA section 1367(i)(2)(A):

‘(A) TRANSFER OF CHARTER-

‘(i) FANNIE MAE- If the Agency is appointed as receiver for the Federal National Mortgage Association, the limited-life regulated entity established under this subsection with respect to such enterprise shall, by operation of law and immediately upon its organization--

‘(I) succeed to the charter of the Federal National Mortgage Association, as set forth in the Federal National Mortgage Association Charter Act; and

‘(II) thereafter operate in accordance with, and subject to, such charter, this Act, and any other provision of law to which the Federal National Mortgage Association is subject, except as otherwise provided in this subsection.

so he couldn't do any amending of the charters without legislation, but the successor companies would still exist and they wouldn't have to keep any current shareholders intact.

HERA section 1367(a)(3)(K) says:

‘(3) GROUNDS FOR DISCRETIONARY APPOINTMENT OF CONSERVATOR OR RECEIVER- The grounds for appointing conservator or receiver for any regulated entity under paragraph (2) are as follows:

‘(K) CRITICAL UNDERCAPITALIZATION- The regulated entity is critically undercapitalized, as defined in section 1364(a)(4).

That means that if Calabria sets binding capital standards (a power he will have), the companies will certainly be immediately classified as critically undercapitalized given their paltry $6B in combined capital. Calabria could then impose receivership immediately. This has nothing to do with the companies' profitability, and it would be perfectly legal. Section (J) would also be easy to apply.