Fannie Mae-No Politics (FNMA)

[Donotunderstand]

No to that

As the GAO noted - very matter of factly - there was a remnant implied guarantee that served F and F well

F and F became oligopolistic due to a lower cost of capital relative to any other player

That oligopoly is not great - even if it worked

A. Explicit guarantee (post huge exposure to F and F and tons of risk sharing agreements to push the risk far and wide) . Anyone who wanted to be in the MBS business and met key standards would be allowed to use this GOV guarantee. Reduces advantage to just F and F but is a good free market solution that F and F with their book of business - contacts - and head start would thrive in. (Plus most if not all of the competitors would be originators of mortgages as well as PLMBS paper - leaving all the banks and others who make mortgages but are too small to do their own private label to work with F and F. This would be a great market with a premium margin, F and F would also at minimum get a ton of large bank business as those banks would be wise to spread their risk over to F and F for say half their origination

B. A privately held sole utility model - with the dividends to common and preferred shares that would follow

Those IMO both work

Killing F and F and tossing everything to private - with no GOV backstop is way too dangerous and not necessary IMO. I say not necessary as we can get the competitive (or regulatory) gains without this exposure to failure on Trillions of dollars