We have gone through the details of the legislative language crafted in the course of last week’s Senate Banking mark-up to identify issues with lasting value either to FHFA’s actions or the structure of legislation to come. The managers’ amendments include several important compromises that will have a lot of impact on FHFA near-term decisions on risk-shares, FHLB regulation, and reliance on MIs. The effort to bar big banks from a major role and at the same time ensure the TBA market for thirty-year FRMs is not only self-contradictory, but also of course political. Still, it also speaks to bipartisan agreement that no one much likes big banks – a policy that puts an even firmer kibosh on Demarco’s self-privatization efforts.
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