Fannie Mae-No Politics (FNMA)

[trojmn]

dang does that sound familiar! Dare i say a reasonable and fair?

And the required changes are straightforward. First, FHFA and Treasury must agree to
declare that Fannie and Freddie have paid back all of the $187 billion they were forced to
draw during the financial crisis, including 10 percent interest (which they have done), and
deem Treasury’s senior preferred stock to have been repaid and cancel it, along with
Treasury’s liquidation preference. Then, FHFA must replace Calabria’s ERCF with a rule
based on the companies’ actual business and credit risks. As I discuss in “Capital Fact and
Fiction” on Howard on Mortgage Finance, a rigorous and highly effective capital regime for
Fannie and Freddie can be built with just three elements: (a) a true risk-based capital
requirement based on a stress test run on each company’s book of business every quarter,
with no cushions or add-ons; (b) a single “all purpose” capital cushion, calculated as a
percentage of this true risk-based requirement, and (c) a minimum capital percentage
aligned with the risk-based capital requirement