Watt missed a couple of great chances to explain why F&F have so much of the mortgage market compared to banks. At least twice he was specifically asked why this is. He hinted about - but did not specifically say - that the reason is F&F do not need any capital reserves to offset their mortgage portfolio. Instead they have gov't guarantees plus the line of credit. Banks would have to tie up 2-5% of their mortgage portfolio value as reserves. This gives F&F a huge advantage.
Banks won't take on mortgages in a big way unless they get a similar deal.
I was hoping he would say that outright - and that the "fix" to that advantage over banks would be to require F&F to recap. If the purpose of recap and release was to help the banks, a lot more congressmembers would get behind that idea.
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