The "retained portfolio" is a reference to the retained mortgage investment portfolios owned by the GSEs. The current mandate is to reduce it to 250 billion but none of the legislation being considered in Congress allows for a specific amount. Corker's "allows an amount such that can facilitate the wind down" (paraphrasing). Unfortunately, no alternative is being discussed -in Congress- that will have the GSEs keep their investment portfolios. This could change. But one day the PSPA will conclude and although it is not clear what will happen afterwards the tone of the discussion is "no investment portfolios".
Today's guarantee has become explicit. I cannot fathom the idea of shareholders being the beneficiaries of the government guaranteeing. Unless warrants are executed and Treasury becomes a de-facto controlling shareholder. Then, shareholders will still be beneficiaries but to the tune of 20.1%. This, in the present climate, looks controversial.
One would hope that Fannie and Freddie survive in some form thus being able to re-insure, securitize (through 3rd party) and maintain a reduced investment portfolio so that there are enough sources of profits for the long term. However, one important and valuable function is being stripped off them (securitization) and it is not clear whether they will benefit from it or for how long or if shareholders will share any benefit coming from the platform. This leaves just one pilar for the existence: guarantees. Do you ever wonder if someone in the government is thinking in a machiavellian way how to slowly dismantle the entities by stripping them off of their essence?
I do not know how the government can absorb the guarantee business? Forcefully, maybe?
