Replies to post #751506 on Fannie Mae-No Politics (FNMA)

[HappyAlways]

Two assumptions:

1. USG is always a guarantor to all major US financial institutions, doesn't matter whether it is implicit or explicit.
2. Fannie and Freddie do not need 4% capital. They do not have bank run risk. Their business is simple and low risk. High capital level implies unnecessary higher mortgage fee.

[Wise Man]

The banks' 1.3% DIF is a RESERVE ratio.
First of all, it's a fund (Deposit Insurance Fund), like the FHA Insurance fund, that can't be compared with corporations that have a balance sheet.
Anyway, it's like the Retained Earnings of a corporation, where there is also Capital Stock and Additional Paid-In Capital, to absorb losses. There is also unrealized gains (AOCI) as Equity. It's measured with the Capital requirements and Capital buffers. You can't mix up a reserve ratio with capital requirements.
Also, it's a reinsurance, not insurance. That is, the claim is only paid after the insured institution is in Receivership. So, the first loss is borne by the Equity holders of the insured institution.
FnF offer insurance (MBS) and recently, reinsurance (MBSs insured by other guarantors)
This is why a Reinsurance (priced at 9.375 bps in FnF) is cheaper than Insurance (60 bps in FnF)
Therefore, a 1.3% reserve ratio is alright, up to a $250,000 deposit, that, as Howard says, it can be replenished with further assessments on banks.
If it's a private Reinsurance and not a Government Catastrophic-Loss Reinsurance as I previously pointed out, the FDIC has no role.
There is Depositor Preference in the liquidation of Assets, with a claim payable before any other creditor. The role of the FDIC could be to advance the interests of creditors linked to political parties like Goldman Sachs, Morgan Stanley, hedge funds, JPM, etc., and screw the depositors. The so called "Utility Model".
This bodes well for a fully private reinsurance in the Housing Finance System, after the Charter of FnF is revoked, to bring in competitors.