Wednesday, April 08, 2015 4:25:51 PM
http://www.housingwire.com/ext/resources/files/Editorial/Files/GrassleylettertoTreas.pdf
These are trickier. We know most of the answers...
Lew will say the 3rd does not interfere with the regulatory mission of FHFA completely dodging the real question which is the companies' undercapitalization and financially unsound operation and then he will expand on #4 by saying there is no need for internal controls and maintenance of adequate capital levels as both companies have an open credit line of 200 billion and these requirements have been frozen (without explaining where that comes from). On #3, he will give the usual response of "the sweep prevented the circular arrangement" and on #5 he will probably give the correct answer that the PSPAs prevent the repayment and that the commitment was not a loan and it is still outstanding which will kill all the effort done by the media to paint it as a loan that has been repaid.
I hope Senator Grassley picks up on the fallacy of #3 and on the illegality of #2 and #4. And on the completely fckd up arrangement of #5. Or better yet, he may come to the -correct- conclusion that Treasury and the WH have been on the driver's seat all along, violating HERA 08'.
Otherwise, it will be business as usual.
The danger here is that these questions are not deep enough. The central question should have been why there was a need to close the circular arrangement in light of the companies being profitable and with financial analysis calling for very large profits (DTAs) in the very near term that would have allowed the companies to build capital or reduce their Treasury commitment.
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