RegardingTimHoward'sReply, specifically his point that new capital for the new companies that would be competitors entering this market would be hesitant or afraid bc they see how the gvt has treated the capital structure of the GSEs, I'm not so sure they'd hesitate at all. That's a big concern of mine. I fear/predict that the banks that would enter this market really just are dying to get a chance to enter it, no matter how poorly the gvt has treated previous capital in this market. I think they've been plotting/working/lobbying for this chance for seemingly 15-20 yrs or so. I don't think they'd care if the gvt stole the GSEs' capital in some live-for-tv event right in front of everyone's eyes. In fact, it is the very same banks who were the CAUSE/INFLUENCE for the original crisis AND the original actions against the GSEs, as well as the 3rd amendment, and the lobbying behind Corker/Warner. Would any of that garbage have happened without the lobbying and influence of the big banks? I think not. So to suggest that now, if they finally got a chance to enter the 2ndary market, they'd hesitate for fear they could be treated the same way seems to miss the mark. I think they'd look at the gvt's treatment of the GSEs' capital structure and say to themselves, "Yes! We got em to do it! It worked! Now let's jump in to take the GSEs' place, now that they've finally been eliminated!"
The relevant portion of Tim Howard's reply:
"While I don’t know if that’s actually what C-W 2.0 is trying to do, if it is a major issue will be how you attract capital into these new entrants. They will be businesses operating with bank-imposed handicaps—including unnecessarily and unjustifiably high capital requirements—and they will need to raise their new capital at a time when the government continues to insist that it has the legal right to appropriate all of the capital of the two existing credit guarantors the new entities are being enticed to replace. Good luck with that."
