Although we will of course defer judgment on Johnson-Crapo until its details are released, we conclude from the outline reached today that Banking’s leadership sided with the home team, rejecting two key Wall Street demands. First, the bill keeps Corker-Warner’s 10% first-loss tranche, meaning that the Street will need to cough up a lot of bucks we don’t think it has. As a result, mortgage finance will fragment from a monoline USG business into different sectors – some backed by capital markets, many not. Second, the bill stands with the White House in firmly rejecting proposals from the Street to reprivatize Fannie and Freddie. The one major compromise we spot that departs in principle from Corker-Warner retains the current conforming loan limit for high-cost areas– Realtors, say thank you.

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