Fannie Mae-No Politics (FNMA)

[whipstick]

Here is what Howard thinks about him. see comments https://howardonmortgagefinance.com/2017/03/20/risk-transfers-in-the-real-world/

Mark Calabria, formerly of the Cato Institute and now chief economist to Vice President Pence, is a staunch opponent of Fannie and Freddie.

I believe the article you are referring to is the one he submitted for the Urban Institute’s “Housing Finance Reform Incubator” series (for which I also submitted an essay), titled “Coming Full Circle on Mortgage Finance.” The “full circle” he advocates in that article is turning Fannie and Freddie into bank holding companies, and returning to what he calls the “originate to hold” model– that is, having all, or almost all, single-family mortgages made and held by commercial banks. His recommendation is premised on his contention that, “Securitization is a false god that failed us.” To make this conclusion, however, he has to conflate private-label securitization (which really was, and is, a “failed business model”) and securitization as it has been and is done by Fannie and Freddie. The two are totally different, and the fact that Calabria incorrectly treats them as being the same in my view invalidates his analysis.

Which brings me to your question about how Calabria’s views may differ with Mnuchin’s. Mnuchin hasn’t said that much about Fannie and Freddie, although at his confirmation hearing he did say, “I think Fannie and Freddie have been well run without creating risk to the government and they played an important role. I believe these are very important entities for liquidity…” That statement certainly doesn’t square with Calabria’s opinion. More to the point, though, there is a tremendous difference between Calabria and Mnuchin in market knowledge and experience. In his paper, Calabria gets the history of the financial crisis wrong, and his prescription for the future is more based on hope (and ideology) than experience. Mnuchin is a pragmatist, and he knows how the mortgage market works. I don’t see Calabria’s wishful thinking having much effect on what Mnuchin wants to or will do in guiding the Trump administration’s actions on mortgage reform.