Treasury knows the banks won’t like that, so it gives them something it thinks they WILL like: Mark Calabria as the nominee to head FHFA. (I think there is zero chance that Calabria’s nomination was made without Mnuchin’s approval.) But, knowing that Calabria’s nomination will take a while (and given the government shutdown and the general dysfunction in Congress, perhaps a long while) to reach the Senate floor for confirmation, Treasury then appoints Joseph Otting—a colleague of Mnuchin’s at One West—as acting director of FHFA, putting him in a position to set the release and recapitalization of Fannie and Freddie in motion. If that gets under way before Calabria becomes head of FHFA, he enters his job under a very different set of circumstances than he might have expected. With Treasury (and the acting FHFA director) having decided that the future secondary mortgage market should be built around a reformed, recapitalized and released Fannie and Freddie, will Calabria really feel (or be) free to hobble them and make them less efficient and less valuable to their stakeholders, who now include not only homebuyers and existing shareholders, but also Treasury? I very much doubt it.
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