Comment Detail

Comment

Maximum capital requirements should be based on average historic actual cash losses during the 2008 - 2012 period and other identified periods of financial stress, excluding non-cash reserves and write-offs dictated by the then Conservator for Fannie Mae and Freddie Mac. Non-cash reserves and accounting write-offs were used to justify the conservatorships and force draws under the Senior Preferred Stock Agreement (SPSA). Actual historic losses should be less than 2% and not near the proposed 4%+ levels. Capital requirements should reflect the Companies' actual business capital risk and not the TBTF bank lobby's recommendations or the current Conservator's ideology. The bank lobby seeks to reduce the Companies' market share to benefit the banks' mortgage lending business. In order raise private capital, the SPSA will have to be considered redeemed and the government's ill gotten warrants cancelled. Cash in excess of a 3% dividend (approximate average rate charged to TBTF banks by the Treasury during the 2008-2012 financial crisis) should be returned to the Companies. Private investors should not subscribe to a capital raise so long as the government controls the Companies or are subject to related political risk. A government guarantee of the Companies securities and a fee to the government is not required as demonstrated by more than 60 years of operations. Such a guarantee if extended to bank held mortgages only benefits the TBTF banks and does not benefit the consumer.