Fannie Mae-No Politics (FNMA)

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The Dodd-Frank Act’s designation authority seeks to achieve two fundamentally
irreconcilable objectives. On the one hand, the Dodd-Frank Act tries to constrain risktaking
through stricter regulation of large, complex financial institutions. But the
designation of these firms undermines market discipline because it sends a clear signal that
government regulators think these firms are “too big to fail”; after all, that is the reason for
subjecting these firms to “heightened prudential standards.”122 Designation thus generates
even greater risk-taking and moral hazard, because creditors and counterparties will not
monitor the firm as scrupulously as they otherwise would, knowing that government
regulators will not allow the firm to fail, which means that they will not suffer losses.123 Or
as noted financial analyst Josh Rosner testified before the Oversight and Investigations
Subcommittee, “Title I and Title II create a special class of GSE-like companies that benefit
from an implied government guarantee.”124
http://financialservices.house.gov/uploadedfiles/financial_choice_act_comprehensive_outline.pdf