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And, ANY ruling by the SCOTUS ALLOWING THE FEDERAL GOVERNMENT TO NATIONALIZE TWO PRIVATE CORPORATIONS FOR ITS OWN FINANCIAL GAIN WOULD DRASTICALLY ALTER EXISTING CONSERVATORSHIP LAW which has developed over 200 years!
The validity of private personal property and the protected rights that go with it are VITAL TO THE EXISTENCE OF A HEALTHY ECONOMY, CAPITALISM, AND A DEMOCRATIC SOCIETY based on the rule of law!
BOTH THE RTC AND CONRAIL TOOK OVER PRIVATE CORPORATIONS THAT WERE IN RECEIVERSHIP NOT CONSERVATORSHIP!
THE TVA may be Constitutionally valid, but DID THE FEDERAL GOVERNMENT TAKE OVER ALL THE ECONOMIC INTERESTS OF THE PRIVATE SHAREHOLDERS WITHOUT ANY COMPENSATION?
Thanks! I found the direct claims arguments hashed out in the SCOTUS and the 5th Circuit EnBanc persuasive!
Look forward to what the SCOTUS has to say...
RTC, under FIRREA, took over tons of Financial Intermediaries during the previous financial crisis of the 1980s AS A RECEIVER NOT A CONSERVATOR!
AMTRAK was not created from expropriated previously private shareholder owned railroads was it?
The TVA didn't expropriate a private electric company leaving their existing shareholders with "0" economic value" did they?
I know BUT, it is absurd to argue that Congress gave a Conservator the right to take 2 private corporations profits into perpetuity, and I think the SCOTUS realizes this from the questions they asked Hashim, Breyer said, "ONE THING CONSERVATORS DON'T DO IS NATIONALIZE COMPANIES!"
Yes, but can you give 3 examples where the Nationalization of private corporations lasted beyond the War time and/or National Emergency and the government was allowed to take the corporations profits into perpetuity?
I'm just looking for the FACTS, FFFacts, I am sure you have that information readily available don't you?
Do you remember Judge Sweeney's legal justification for ruling in favor of the legality of the Amendments, was it based on the "May" versus "Shall" legal justification?
I think many of Hashim's arguments for his client, da gubmint, aren't even getting off the ground, remember these bogus arguments to justify the governmental Nationalization of two private corporations:
1. May versus Shall to justify that a conservator DOES NOT HAVE TO CONSERVE AND PRESERVE ITS WARDS ASSETS.
2. The Death Spiral: Discredited in Discovery by the Fannie Mae CFO telling UST, the Golden Years are ahead and Jim Parrots Salt the Earth emails to his "fellow travelers".
3. Shareholders can't ask the courts to correct this governmental fiasco/injustice.
4. Everything is working perfect here, no reason to peak behind the curtain even though conservatorships are suppose to be temporary and the intent of HERA has been violated!
If the US Government is allowed to Nationalize private corporations it is no better than a Banana Republic!
What about the "Death Spiral", what a crock of sheet!!!
What we need is for da gubmint to quite stealing their profits! Conserve and Preserve my arse!
Could be inside a number of the 11,000 documents, "National Security" and "Executive Privilege" were likely a desperate attempt by one or more bad governmental actors to keep it perpetually hidden from the American people and especially the Collins and other Plaintiffs!
The SCOTUS AND SM have the power to put this ugly chapter of governmental overreach to bed, BUT WILL THEY?
You forgot to mention that the government forced them to take aggressive and unreasonable write downs of assets and artificially pumped up loan loss reserves, JUST SO THE GOVERNMENT COULD GET THEM FOR FREE POST NET WORTH SWIPE!!!
The public utlity model has been advocated by BA for almost a decade now, will be interesting to see what the SCOTUS does about the NATIONALIZATION of two privately owned corporations by the government! Also, SM has the legal ability to lay out the future path forward, but with only 3 weeks apparently left, we will have to "see what happens".
Navy, maybe YOU WERE RIGHT ALL ALONG, THE SCOTUS WILL HAVE TO RIGHT THE SHIP!
Interesting times, thanks for all your contributions to us long suffering shareholders!
This reply letter of February 11, 2020, was answering questions posed by the Democratic Senators from the Senate Banking Committee, that's why Maxine wasn't cc'ed on the letter! She always has the best looking hair of any of the SBC or HFSC, doesn't she?
Is she chairing the HFSC next year? That one lady from California, she's a real pistol, isn't she, you remember her exchange with SM, "Are YOU a Lawyer?" she said, then SM: "NO, but I have a whole team of them that report to me!'
She was giving MC shit too, I think her name is Laura Porter (D-Ca.). She might as well have said, "SM, why are you a capitalist pig, helping out these evil banksters/greedy hedge fund guys!' Too which, SM should reply, "Laura, why are you an elitist Harvard Educated Socialist, that thinks the government should provide for every need of its citizens from cradle to grave, don't you realize you are just creating more dependency on the government instead of freedom?' NOW THAT WOULD BE FUN TO WATCH!
Both SM and MC have given everybody notice about what they would do administravely in the event the Legislative Branch doesn't do anything. Let's see if SM follows through, at a minimum he needs to increase the amount of the earnings retention cap from its current $45B, we will know for sure, soon enough!
February 11, 2020
We write in response to your December 17, 20 I 9 letter inquiring about the Administration's
plans to reform our nation's housing finance system. We appreciate the opportunity to further
engage with you on this issue and look forward to continuing to work with Congress to enact
reform.
The Treasury Department and the Federal Housing Finance Agency (FHFA) share your belief
that it is critical to maintain robust and liquid residential finance lending markets, protect acces
to mortgage credit in all market conditions, and promote sustainable homeownership and
affordable rental opportunities for working families. To do so, we must build a resilient housing
finance system that protects taxpayers, defines a limited role for the federal government, and
promotes private-sector competition.
On September 5, 2019, Treasury released its Housing Reform Plan (Plan) pursuant to the
Presidential Memorandum issued on March 27, 2019. The principles Treasury laid out are simple
and clear; protect taxpayers, promote private-sector competition, preserve and improve support
for affordable housing, and do so without increasing borrowing costs or jeopardizing access to
the 30-year fixed-rate mortgage. Additionally, Treasury made legislative and administrative
recommendations, including identifying preconditions for the termination of the governmentsponsored enterprises' (GSE) conservatorships. In making these recommendations, Treasury was
not prescriptive as to a specific path or the timeline to be followed, as those items warrant a more
fulsome and iterative review as the reform initiatives evolve.
Treasury's recommendations for administrative action are well aligned with, but do not
supersede, FHFA's statutory duties as the independent regulator and conservator of Fannie Mae
and Freddie Mac (the GSEs or the Enterprises). The Housing and Economic Recovery Act of
2008 (HERA) established FHFA as "an independent agency of the Federal Government" with
the authority and responsibility to ensure the Enterprises operate "in a safe and sound manner,
including maintenance of adequate capital and internal controls."
Treasury and FHFA believe comprehensive housing finance reform legislation could best
achieve lasting structural reform that tailors explicit government support of the secondary
market, repeals the GSEs' congressional charters and other statutory privileges that give them a
competitive advantage over private-sector competition, and grants FHFA the authority to charter
competitors to the re-chartered GSEs. Notwithstanding our shared preference for legislation,
Treasury will continue to support FHFA's administrative actions to enhance the regulation of the
GSEs, promote private-sector competition, and satisfy the preconditions set forth in its plan for
ending the GSEs' conservatorships.
We appreciated the opportunity to testify before the Senate Banking Committee on September
10, 2019 on these issues and have since submitted responses to the Questions for the Record that
many members of the Committee provided thereafter. Enclosed are our responses to the
questions set forth in your December 17, 2019 letter. Where appropriate, these responses reflect
the distinct authorities and responsibilities of Treasury (as a part of the Administration) and
FHFA (as an independent regulator). For questions more appropriately answered by one or the
other of our agencies, we have noted that in our response.
Treasury and FHF A look forward to working with Congress on a bipartisan basis to develop
legislation for comprehensive housing finance reform that establishes a stronger and more
resilient housing finance system.
If you have any further questions, please direct your staff to contact Treasury's and FHFA's
legislative affairs offices.
Sincerely,
Steven T. Mnuchin
Secretary
U.S. Department of the Treasury
Enclosure
cc: The Honorable Sherrod Brown
The Honorable Catherine Cortez Masto
The Honorable Doug Jones
The Honorable Robert Menendez
The Honorable Jack Reed
The Honorable Brian Schatz
The Honorable Kyrsten Sinema
The Honorable Tina Smith
The Honorable Jon Tester
The Honorable Chris Van Hollen
The Honorable Elizabeth Warren
2
Mark A. Calabria
Director
Federal Housing Finance Agency
Attachment: Responses to Questions Posed in 12/17 /19 Letter
1. Please explain, in detail, the timeline, or benchmarks, by which the Administration intends to
adopt reforms and release the GSEs from conservatorship. If multiple timelines are being
considered, please provide all potential scenarios.
o Treasury: Our preference is to work with Congress to enact comprehensive housing
finance reform legislation. The Treasury Plan recommends that, pending legislation,
FHFA should exercise its authority as conservator to begin the process to end each GSE's
conservatorship. In its Plan, Treasury makes recommendations and lists preconditions for
the termination of the GS Es' conservatorships, including, among other things,
amendments to the Senior Preferred Stock Purchase Agreements (f>SPAs) and FHFA's
determination that each GSE can operate safely and soundly and without posing an undue
systemic risk or disrupting mortgage markets. The Treasury Plan was not prescriptive
with respect to a specific path or the timeline, as those items warrant a more fulsome and
iterative review. The process of developing a roadmap for each Enterprise's exit from
conservatorship is still ongoing.
o FHFA: From FHFA's perspective, its assessment of the timeline for an Enterprise's exit
from conservatorship will be driven by the Enterprise's ability to meet financial , riskmanagement, and operational benchmarks appropriate for financial institutions of their
risk, size, and systemic importance. FHFA's Strategic Plan for the Conservatorships,
released by FHFA in October 2019, instructs the Enterprises to support FHFA in the
development and implementation of responsible, milestone-based plans to transition out
of conservatorship, including capital restoration strategies and roadmaps.
2. Please explain, in detail, any and all administrative reforms that you believe are necessary at
the GS Es prior to their release from conservatorship, and how those reforms fulfill the GSEs'
charter obligations.
o Treasury: The Treasury Plan recommends that, pending legislation, FHF A should
exercise its authority as conservator to begin the process to end each GSE's
conservatorship. In its Plan, Treasury makes recommendations and lists preconditions for
the termination of the GS Es' conservatorships, including, among other things,
amendments to the PSPAs and FHFA's determination that each GSE can operate safely
and soundly and without posing an undue systemic risk or disrupting mortgage markets.
o FHFA: To exit conservatorship, each Enterprise must maintain the risk management
practices, corporate governance standards, capital, and other loss-absorbing capacity
necessary to operate in a safe and sound manner and in accordance with the statutory
purposes stated in their charters. To achieve these objectives, FHFA will consider the
following administrative reforms: (i) prescribing regulatory capital requirements for both
Enterprises; (ii) approving a capital restoration plan developed by each Enterprise; and
(iii) strengthening FHFA's supervisory and oversight procedures and systems to ensure
that examination of the Enterprises is consistently rigorous, timely, and effective, and that
additional resources are efficiently allocated to meet the needs of critical areas such as
risk modeling and information technology.
3
3. Would you consider releasing the GSEs prior to full implementation of the enumerated
reforms? If so, please provide your reasoning and under what circumstances you would
considering doing so.
o Treasury and FHFA: Treasury's Plan recommends that, pending legislation, FHFA
should exercise its authority as conservator to begin the process to end each GSE's
conservatorship. In its Plan, Treasury makes recommendations and lists preconditions for
the termination of the GSEs' conservatorships, including, among other things,
amendments to the PSPAs and FHF A's determination that each GSE can operate safely
and soundly, and without posing an undue systemic risk or disrupting mortgage markets.
4. Please explain, in detail, what reforms or policy changes may be adopted as part of an
amendment to the Preferred Stock Purchase Agreement (PSPA). What, if anything, prevents
future modifications to these changes?
o Treasury and FHFA: On September 30, 2019, consistent with the Treasury Plan,
Treasury and FHF A announced that they had agreed to permit the GSEs to retain
additional capital-up to $25 billion for Fannie Mae and $20 billion for Freddie Mac. In
these letter agreements, Treasury and FHF A committed to pursue additional changes to
the PSPAs that would implement administrative reforms detailed in the Plan. Treasury
and FHF A are considering what additional amendments to the PSPAs are appropriate,
and therefore it is not possible to say at this time what policy changes will be adopted as
part of any future PSPA amendments.
5. Do you intend to maintain a line of credit with the Treasury outside of conservatorship
through the PSPAs? Would you maintain the current dollar amount of the line of credit or
adjust to some other amount? What, if anything, prevents removing that line of credit in the
future?
o Treasury: To preserve stability in the housing finance system pending comprehensive
housing finance reform legislation, Treasury expects that it will be necessary to maintain
limited and tailored government support for the GSEs by leaving the PSPA commitment
in place after the conservatorships have ended.
o FHFA: Treasury and FHFA are considering what additional amendments to the PSPAs
are appropriate. Any future amendments to the PSPAs require the agreement of both
FHF A and Treasury.
6. Please explain, in detail, the legal basis for using a consent agreement to accelerate the
release of the GSEs from conservatorship. Under what conditions does the Administration
plan to use the consent agreement to further the release of the GS Es from conservatorship,
and what reforms or restrictions would be considered under this agreement?
o FHFA: As an independent regulator, a consent order may or may not be part of the path
to an Enterprise's exit from conservatorship. A consent order does not necessarily
accelerate the end of a conservatorship. By setting requirements to which the Enterprises
would be expected to adhere after exiting conservatorship, a consent order may provide a
4
bridge between conservatorship and a return to the Enterprise operating its business in the
ordinary course. This is a well-established regulatory method to resolve issues that
warrant enforcement actions without expending the time and resources necessa:ry to
present specific charges and conduct public hearings. A consent order is entered into
voluntarily between a regulated entity and its regulator and can be enforced by the
regulator through common enforcement actions, similar to the way a court maintains
jurisdiction during the settlement of a court action in order to ensure compliance. For
instance, under a consent order, FHF A would have the authority to permit an Enterprise
that has reached a certain capital level below the required minimum to operate outside of
conservatorship subject to a capital restoration plan (see 12 U.S.C. §§ 4615 , 4616, 4617,
4622). Under such a scenario, if the Enterprise were to fail to comply with the consent
order and the capital restoration plan, FHF A would have immediate grounds to proceed
to enforcement in any manner it considers appropriate, including considering whether
grounds exist for appointing a conservator or receiver under 12 U.S.C. § 4617(a)(3), or
further enforcement under 12 U.S.C. § 4631 through 4636a.
7. What, if anything, prevents a future modification to the consent agreement?
o FHFA: A consent order is an agreement. Methods of modifying a consent order are
either provided for in the consent order itself or agreed to by both parties. In the event an
Enterprise were to fail to comply with the terms of a consent order and the two parties
could not agree on a resolution through modification, FHF A would have the authority to
employ any of the enforcement methods described above.
8. What capital levels do you believe would be necessary for purposes of releasing the GSEs
from conservatorship?
o Treasury and FHFA: FHF A is in the process of re-proposing its capital rule for the
Enterprises. Therefore, it is premature to comment on specific capital levels beyond
reiterating that ultimately the Enterprises should maintain capital appropriate for financial
institutions of their risk, size, and systemic importance.
9. Would you consider releasing the GSEs from conservatorship before they have built the level
of capital you require of them as their regulator? If so, please explain why you would release
them prior to having met their regulatory capital requirements?
o Treasury and FHFA: FHFA is in the process of re-proposing its regulatory capital rule
for the Enterprises. Treasury's Plan recommends that, pending legislation, FHFA should
exercise its authority as conservator to begin the process to end each GSE's
conservatorship. In its Plan, Treasury makes recommendations and lists preconditions for
the termination of the GS Es' conservatorships, including, among other things,
amendments to the PSPAs and FHFA's determination that each GSE can operate safely
and soundly and without posing an undue systemic risk or disrupting mortgage markets.
I 0. How does the Administration plan to raise the level of capital that FHFA deems necessary
and on what timeline? Would the Administration consider releasing the GSEs from
5
conservatorship prior to achieving a threshold capital level, and if so, what level would that
be?
o Treasury and FHFA: At the appropriate time, the Enterprises will likely need to raise
third-party capital. However, Treasury and FHF A have not made recommendations or
decisions as to how or when such a capital raise should occur. The options pose complex
financial and legal considerations that will merit careful consideration, which Treasury
and FHFA will be exploring. Since Treasury and FHF A signed the letter agreements
modifying the PSPAs on September 27, 2019, the Enterprises have approximately tripled
their combined capital through retained earnings, which is one important avenue for
building a level of capital commensurate with operating in a safe and sound manner.
11. Fannie Mae and Freddie Mac make valuable contributions to the housing market, in part due
to investments made over the past decade. Would the Administration consider reducing the
value that the GS Es provide to American taxpayers in order to expedite the release of the
GSEs from conservatorship?
o Treasury: Pending legislation, Treasury and FHF A will review a range of options
consistent with the objectives and recommendations in the Plan as we consider changes
to the PSPAs in the months ahead.
12. Would the Administration consider changing the repayment requirements of the existing
PSPA? If so, how?
o Treasury and FHFA: FHFA and the Administration 's preference is to work with
Congress to enact comprehensive housing finance reform legislation. Pending legislation,
Treasury and FHFA will review a range of options consistent with the objectives and
recommendations in the Plan as we consider changes to the PSPAs in the months ahead.
As contracts between FHFA (as conservator of the Enterprises) and Treasury, the PSPAs
are subject to future amendments upon agreement by both parties. No decision related to
Treasury's repayment requirements has been made at this time.
13. Does the Administration plan to reduce the GSEs' footprint? If so, what specific product
lines and services would see an increase in price or be curtailed or eliminated at the GSEs?
What is the statutory authority for such a plan? Please provide any models or assessment that
FHF A has conducted to analyze the impact of these changes on prospective homeowners,
ex isting homeowners, renters, and the cost and availability of credit across mortgage
products.
o Treasury: Treasury recommends that activities that benefit from government support
should be assessed to ensure they align with a clear rationale warranting such support.
Treasury took great care to formulate its recommendations in the Plan to mitigate the risk
of market disruption or an increase in borrowing costs. Absent legislation, FHF A, as an
independent agency, will determine whether to pursue recommendations in the Plan.
o FHFA: As Congress debates housing finance reform legislation, it will be critically
important to define the role of the Enterprises, including permissible activities. Pending
6
legislation, FHF A will remain focused on fulfilling its statutory responsibilities to ensure
that the Enterprises serve as a reliable source of liquidity for our nation's housing finance
markets and for community investment. To date, FHF A has not formally constructed any
models or assessments related to potential changes to the Enterprises' products or
services. Any such changes must be consistent with the FHF A Director's statutory duties,
which include ensuring that "each regulated entity operates in a safe and sound manner,
including maintenance of adequate capital and internal controls." 1
14. Do you believe that the GSEs will provide a smaller cross-subsidy in the mortgage market if
their role is reduced, as you propose? If not, how would they be able to provide the same
level of cross-subsidy and nationwide access in both the single~family and multifamily
markets in a reduced role? If so, what do you propose to do administratively to ensure that
they are still able to provide as much support for low- and moderate-income lending and
access to credit among underserved communities?
o FHFA: Treasury and FHFA share the goals of protecting taxpayers and defining the role
of the federal government in the housing finance system, while also promoting privatesector competition. Pending legislation, FHFA will continue to ensure that the
Enterprises fulfill their statutory obligations. For instance, one of the three core objectives
of the new Strategic Plan for the Conservatorships that FHF A released in October 2019 is
to ensure that the Enterprises focus on their core mission responsibilities to foster
competitive, liquid, efficient, and resilient national housing finance markets that support
sustainable homeownership and affordable rental housing.
15. Will the GSEs continue to contribute annually to the Housing Trust Fund and Capital Magnet
Fund throughout any transition to your desired end state? Under what circumstances would
you potentially consider allocations to these trust funds as preventing the GSEs from
completing a capital restoration plan? Do you expect to deem either GSE as
"undercapital ized"?
o FHFA: Decisions regarding contributions to the Housing Trust Fund and Capital Magnet
fund are determined by a process established in HERA. By statute, the FHF A Director
must temporarily suspend Enterprise allocations to the Housing Trust Fund and the
Capital Magnet Fund upon a finding that the allocations (1) are contributing or would
contribute to the financial instability of the Enterprise, (2) are causing or would cause the
Enterprise to be classified as undercapitalized, or (3) are preventing or would prevent the
Enterprise from successfully completing a capital restoration plan. Because FHF A
suspended Enterprise capital requirements when the Enterprises were placed in
conservatorships, the latter two conditions have not been applicable. To assess the
financial stability of the Enterprise, FHF A considers Enterprise earnings and income,
among other performance measures. Post-conservatorship, FHFA will assess the capital
levels of the Enterprises as required by statute in 12 U.S.C. § 4567(b).
16. Does the Administration intend to undertake a new rulemaking for the Enterprise Housing
Goals for mortgages purchased by the GSEs? Will the scope of that rulemaking exceed the
1 12 U.S.C. § 451 3(a)(l ).
7
scope of the previous rulemaking, which recalibrated numerical purchase goals but did not
alter the fundamental structure of the goals?
o FHFA: As an independent regulator, FHFA has rulemaking authority and jurisdiction
over the Enterprises' housing goals. The most recent rulemaking was made effective
March 14, 2018, and covers the Enterprise housing goals through 2020. FHFA intends to
conduct a rulemaking regarding the housing goals later this year.
17. Will the Administration seek to amend the Duty to Serve rule, or otherwise amend the types
of products and services the Enterprises may offer to meet their Duty to Serve requirements?
o FHFA: As an independent regulator, FHFA has jurisdiction over the Duty to Serve rule
and the types of product's and services the Enterprises may offer. Also, FHF A has the
statutory responsibility to implement the Duty to Serve requirements established in
HERA. Accordingly, the Enterprises are responsible for serving rural, manufactured
housing, and affordable housing preservation markets. The Duty to Serve requirements
will be a consideration in the process of developing and implementing a responsible plan
to transition out of conservatorship. The Enterprises' current three-year Underserved
Markets Plans went into effect on January 1, 2018 and cover the Enterprises' objectives
and activities under the Duty to Serve program through 2020. FHF A expects the
Enterprises to develop new Duty to Serve plans later this year.
18. What analysis has the Administration undertaken to understand the impact of any reforms or
changes in product offerings or pricing to the profitability of the GS Es? What analysis has it
performed to understand the impact of such changes on housing affordability, g-fees, or
potential market disruptions across all segments of borrowers?
o Treasury: The Plan provides a framework for reform. It would be premature to draw
conc lusions about the impact of reforms pending any decisions regarding how to
implement Treasury's recommendations. Absent legislation, FHFA, as an independent
agency, will determine whether to pursue recommendations in Treasury's Plan. Treasury
took great care in formulating its recommendations in ways that would not disrupt the
market, raise borrowing costs, or limit access to credit for creditworthy borrowers to
achieve sustainable homeownership.
19. What analysis has the Administration performed to model specific effects of any reforms or
changes in product offerings or pricing on access to mortgage credit for low- and moderateincome homebuyers and renters; first time homebuyers; or borrowers of color? Please
explain in detail any assumptions underlyi ng your analysis. If you have not conducted such
an analysis, please explain how you could move forward on any of the proposed provisions
without such calculation while also fulfilling the GSEs' statutory mandates to "provide
ongoing assistance to the secondary market for residential mortgages (including activities
related to mortgages on housing for low- and moderate income families involving a
reasonable economic return that may be less than the return earned on other activities) by
increasing the liquidity of mortgage investments and improving the distribution of
investment capital available for residential mortgage financing" and "promote access to
8
mortgage credit throughout the Nation (including central cities, rural areas, and underserved
areas)."
o Treasury: Treasury recommends that activities that benefit from government support
should be assessed to ·ensure they align with a clear rationale warranting such support.
The Plan provides a framework for reform. It would be premature to draw conclusions on
the impact of reforms pending any decisions regarding how to implement Treasury's
recommendations. Treasury took great care to formulate its recommendations to mitigate
the risk of market disruption or an increase in borrowing costs. Absent legislation, FHF A,
as an independent agency, will determine whether to pursue recommendations in
Treasury's Plan. Treasury supports the GSEs' longstanding role in promoting access to
affordable mortgage credit, including access by low- and moderate-income, rural, and
other historically underserved borrowers.
20. Please describe any concerns raised by investors with releasing the GSEs from
conservatorship without an indefinite government backstop and any response you might have
to those concerns.
o Treasury: In the absence of Congressional action to establish an explicit, paid-for
guarantee backed by the full faith and credit of the federal government limited to the
timely payment of principal and interest on qualifying MBS, Treasury expects that it will
be necessary to maintain limited and tailored government support for the GSEs by
leaving the PSPA commitment in place after the conservatorships have ended. Treasury's
support through the PSPA commitment continues to provide confidence to investors that
the GSEs will meet their financial obligations. Stability in the housing finance system is
crucial, and there should be no disruption to the market as a result of Treasury's
recommended administrative reforms. Only Congress has the authority to create an
explicit government guarantee. We look forward to working with Congress on a path
forward.
o FHFA: In considering and overseeing each Enterprise's implementation of its eventual
roadmap to exit conservatorship, FHFA will use its available supervisory, regulatory, and
other authorities to oversee the Enterprise's fulfillment of its statutory mandates,
including to continue supporting a competitive, efficient, and liquid housing finance
system.
2 1. Please provide FHF A's analysis of impacts on mortgage costs and the To-Be-Announced
market from releasing the GSEs from conservatorship or any other changes to the GSEs'
current status without a line of credit or other catastrophic backstop.
o FHFA: FHF A intends to follow and comply with the requirements and duties set forth in
statute, including Section 1367 of HERA, regarding the grounds for determining the
status of its regulated entities. Treasury and FHF A will proceed expeditiously but
prudently to protect American taxpayers while promoting the integrity of residential
lending markets.
9
22. Will the Administration conduct a fair housing ana lysis of all proposed policy changes? If
not. why not? Has the Administration already conducted such an analysis of its proposed
policy changes?
o Treasury: The Plan provides a framework for reform. It would be premature to conduct
detailed analysis pending any decisions regarding how to implement Treasury's
recommendations. Treasury took great care to formulate recommendations in its Plan in
ways that would not disrupt the market or limit access to sustainable homeownership.
o FHFA: As an independent regulator, FHFA has not conducted any analyses related to the
Administration's plan. FHFA's Office of Fair Lending Oversight oversees and meets
regularly with the Enterprises to assess policy and program changes and will continue to
do so.
I mean SM has been talking about this since Day 1, there has always been resistance to the status quo, but it could allow the new administration to focus on other things in DC BESIDES the LAST UNFINISHED PIECE OF BUSINESS FROM THE GREAT FINANCIAL CRISIS!
I know, you can see the full press the D's, the MBA\ABA, the NAR, the Structured Finance people, et. al., are applying! Fact is, SM and MC have given plenty of Notice to Congress AND all those wanting to keep the status quo that they would do this administravely if Congress didn't act. Both SM and MC knows BOTH their days AND POWER are numbered.
Let's see what happens, its less than 30 days away!
Compared to the previous 12 years, things are moving realitively quickly, even for a skeptic!
Very good and to the point! For that one, you just earned a free beer of your choice at the Brew House inside Nats Park this Spring or Summer. Just let me know which game you will be at and I will wear my 2019 World Series Soto Jersey!
Thanks for sharing your well thought and prescient insights!
Congress has had 12+ years to figure out what they want to do, Steve Mnuchin and FHFA explained that a Conservatorship is intended to be temporary, that they will follow HERA and exit government control administratively, and HOW THEY WOULD DO IT in their joint reply letter from February 11, 2020:
"In these letter agreements, Treasury and FHFA committed to pursue additional changes to the PSPAs that would implement administrative reforms detailed in the Plan."
29.5% ANNUALIZED GROWTH RATE AT FREDDIE LAST MONTH, DAMN!
For your viewing pleasure: http://www.freddiemac.com/investors/financials/monthly-volume-summaries.html
It will be interesting to see how this plays out!
Some things that may not "BOVE WELL", is the simple fact that after having ALL THEIR CAPITAL FOR 8 YEARS DRAINED BY ALL PEOPLE, THEIR "CONSERVATOR" AND THEN HE DOUBLES THEIR PREVIOUS CAP RULE, Capital Accumulation is at a premium and I don't see any being dissipated on dealing with the jps unless there is a court ruling on the issue.
But we will see, won't we?
That's good, I think both will do better than today when the Net Worth Swipe ends and we see a little more clarity on the pspa and any consent decree.
Fnmas = approximately $10 per share/$2.50 per share for fnma = 4to1. More precisely, fnma(x) junior preferred share price/fnma share price. Thus, the market conversion price of converting jps to common is 4 to 1.
I was just merely stating that if the numerator is capped at a percentage of the par value of the particular class of jps (e.g., $25 or $50) and the denominator keeps rising relative to jps, then the conversion ratio will be less and less.
Hence, jps arguments tend to attack that premise and argue that the denominator will decrease because of massive dilution, receivership, low PE ratios, a US Housing Market collapse, etc., just as discussed this weekend.
Given that more and more people are realizing that the government has acted horribly here, that having the US government Nationalize private companies is bad public policy for so many reasons, that the loan has already been repaid with a tidy profit for the government, that MC is actually following the law and SM knows they should be out of government control, that the housing market is strong and earnings robust, it seems the delta or rate of growth in the denominator will be faster than the numerator.
As the uncertainty surrounding their release becomes less and less, the market conversion rate will go below 4 to 1, as the JPS are likely capped at par or a % of par, WHEREAS COMMONS AS THE TRUE OWNERS OF THE ENTITIES WILL NOT BE CAPPED BY A PAR AMOUNT!
Anybody at the mall today?
Thanks, Guido, but Brooge posted a link to the letters to the editor of the WSJ today, two of the letters, Bob B., President of MBA, and our favorite, David H. Stevens, of course said SM should hold off on releasing the gses!
Gary Hindes wrote in as well! Brooge is stuck at the mall and wanted me to send him the comments and article from todays WSJ, but I couldn't access it a 2nd time.
I tried to go back in and they threw up the dreaded paywall sign! Somehow I got in earlier and there were only 3 or 4 comments and one astutely observed that since the US GOVERNMENT BORROWED ALL THE$190B THAT THEY "LENT" TO THE GSES AT 3% OR LESS AND "LOANED" IT TO THE GSES AT 10%, AND WERE PAID BACK $308B, THEIR RETURN WAS ASTRONOMICAL.
Gary Hindes made some nice comments!
If you hear "Jingle Bells" played yet again at the mall for the 1000th time, try not to lose it in public!
Nice thanks for sharing, enjoyed the comments section!