So, now we have the following: FHFA on Friday deferring its forgiveness decision, Democrats lambasting it Tuesday for “withholding” documents and, then, Republicans firing back with a letter asking if Treasury is trying to pressure the FHFA to violate the legal constraints of the conservatorship. This will wage on, we fear. But, a key fact is evident in the details of the various letters lobbed in this battle: the GSEs have woeful operational capacity, capacity surely getting even worse in light of recent management defections. This structural weakness is a serious strategic issue in mortgage markets largely overlooked in the current political furor.


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