Fannie Mae-No Politics (FNMA)

[Freddie bagholder]

It’s important to remember that Thompson was appointed Director of FHFA after key members of the Financial Establishment objected to the pending nomination of Mike Calhoun to that position. Previously, she had been FHFA’s Deputy Director of the Division of Housing and Mission Goals. She does not have a background in or experience with the unique financial aspects of Fannie and Freddie’s business model, and I doubt she has formulated an independent view of what to do about what I call the “Calabria capital standard.” I also suspect that the careerists at FHFA who worked on formulating this standard are defensive about it, and argue that the 4.0 percent “bank-like” minimum capital requirement is fair, and promotes safety and soundness (and assume, incorrectly, that Fannie and Freddie can just keep raising their guaranty fees until they hit whatever ROE target FHFA sets for them). Thus I don’t think it’s realistic to expect Thompson to advocate for a change to Fannie and Freddie’s risk-based capital standard that her staff is reluctant to make (since it would be an implicit criticism of their prior work), unless the “serious people” in the mortgage industry she looks to for approval are in support of it.