The MBA said a permanent, paid-for government backstop for agency mortgage-backed securities would be the ideal way to ensure a deep, liquid secondary mortgage market.
More importantly, the analyst noted, the council threatened to impose still stricter standards or designate the GSEs as systemically important financial institutions if the capital rule was materially softened.
This official speculated that perhaps Calabria was referring to the companies’ corporate culture before the financial crisis, when the politically connected secondary market giants were widely feared on Capitol Hill.
If the Financial Stability Oversight Council gets its way, GSE capital standards will be tighter than what many in the industry want. Is that a problem? Opinions vary.
Eric Kaplan of the Milken Institute said the best possible explanation for the FHFA director’s remark is he thinks the GSEs may still have some of that profit-at-any-cost mentality that got them into trouble a decade ago.
The council said any distress that affects the secondary mortgage market activities of the GSEs “could pose a risk to financial stability if those risks are not properly mitigated.”