Don Layton does a good job explaining the Implicit Federal Government Guarantee in Footnote 15: "But, at its core, the implied guarantee was based on the fact that the role played by the GSEs was so pivotal to the economy that the government could not take the pain of their failure. While there were subsequent legal requirements for the government to officially disavow any guarantee of GSE debt, in 2008 the implied guarantee was shown to be very real, with the conservatorship and PSPA being operated to make the creditors of the two companies whole (although shareholders were not). Interestingly, the credit rating agencies (e.g., Moody’s, Standard & Poor’s) stated clearly in their credit rating publications of the time that the AAA given to the two GSEs was based on that implied guarantee, just as they do today (in technical language) for other organizations which still enjoy such an implied guarantee (e.g., the Federal Home Loan Bank system)."
Footnote 16 ain't bad either: "Thus, only the government had a strong interest in ensuring the financial strength of the GSEs. Unfortunately, it did not do so prior to conservatorship. During much of conservatorship (specifically 2012 to 2019), strangely, capital was depleted by design. However, beginning in late 2019, capital began to be accumulated and currently stands at $97 billion for the two firms."
Later in the paper: "Thus, to eliminate the current policy inconsistency, which emanates from the switch to the ERCF from CCF, solely by increasing the average G-fee would require it to go from 0.46 percent to about 0.66 percent (or, with the separate 0.10% excise tax that the government adds to G-fees included, from 0.56% to 0.76%)."
Recall that pre 2008 the Net Interest Margin from the Mortgage Portfolios (non MBS Mortgages held by the GSES) was approximately greater than 1%, THUS SUBSIDIZING THE PRE-CONSERVATORSHIP MBS GFEE OF 20 BASIS POINTS.
