Fannie Mae-No Politics (FNMA)

[FOFreddie]

Great questions:

Calabria is a CATO guy and wanted to take a hard line regarding capital maybe expecting the Democrats to object to such stringent levels because it would reduce the potential for affordable housing programs. If he was going to have to take the Adminstrative route he could have compromised on the capital requirements to appease Sherwood Brown and the gang. To some extent philosophy and too some extent posturing.

McNuchin had to work with the same DOJ who had been litigating the same cases since 2014 - the guys who always brought up the lottery ticket. He had to take their advice to appeal but we all thought we would wind on the APA claim and the NWS would be ruled Unconstitutional. The Govt sent a junior Solicitor General and I think we all thought that Thompson cleaned his clock. The decision was nothing like the oral arguments.

Treasury Secretaries always have to take the USG position just like Yellen will have to now but the key is how they finese the outcome to meet a policy goal. I think Yellen knows she does not have time to push the cramdown through but will take the CBO line of logic to start. Just like McNuchin she has to think about the political opposition and that is why I think we need to focus on the Nationalization issues and how this could be a playbook for future Nationalizations like the Farm Credit system mentioned in the last paragraph of the CBO report. I would expect them to go out with a proposal keeping the SPS in place but then settle depending on how the law suits play out. I dont see how they can convert anything that takes the UST over 80 pct ownership or will cause unanticipated budget issues - especially if they want to keep the UST windfall in an affordable housing subsidiary.