Fannie Mae-No Politics (FNMA)

[jacklanvo99]

This Fannie-Freddie resurrection needs to die

The latest iteration of recap and release is a hedge-fund-backed bill sponsored by Rep. Mick Mulvaney (R-S.C.), which would set Fannie and Freddie, unreformed, loose on the marketplace again and do so under terms wildly favorable to the hedge funds. Specifically, shareholders would be charged nothing for the government backing the entities would retain, supposedly to save scarce resources for the capital cushion. But as the Wall Street Journal recently noted, capital could be “risk-weighted” so forgivingly that the actual cushion required might be considerably less than headline numbers suggest. It’s true, as the bill’s backers say, that this could be tweaked in committee, but that would still mean expending precious political time and energy on resurrecting the old, failed business model.

This bad idea’s undeadness illustrates the risks inherent in perpetuating the institutional limbo around the U.S. housing finance system, which is, unfortunately, what Congress and the administration have done so far. Fundamental reform would be a good idea, but you already know what happens to that.

https://www.washingtonpost.com/opinions/this-fannie-freddie-resurrection-needs-to-die/2016/06/03/c8ad5162-282f-11e6-b989-4e5479715b54_story.html