So - these bills allow F and F to survive as monoline insurers and as reinsurers?
So who would buy the mortgages from small banks and package them as MBS? The big banks?
Recall the small and mid size 1000s of banks are concerned that if the TBTFbanks can issue mortgages - bundle them - sell MBS paper - that the big banks will
1. One have unique market dominating knowledge for say half of the mortgage world as to what paper is good and what is bad !!!! (we have seen them do this before and they will do it again and nothing in this legislation prevents TBTF banks from doing this again
2. Avoid - or overprice the cost to small and medium banks who need someone to buy and aggregate and bundle and sell their mortages to create liquidity. That is a role for F and F
The more I think of it - the market could break down with TBTF banks doing it all - but I think buyers demanding higher interest rates on their paper?
And 1000s of banks sellng paper to F and F to aggregate - bundle and sell as MBS paper
F and F might then also have separate parts that are in the insurance and reinsurance biz?
The current Senate bill makes no sense to me - as others - in many writings point out - it takes the risk the gov has - capped now at 250B... and makes it explicit and 5 Trillion x .90
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