Shooting Down Dubious Arguments Against GSE Recapitalization
In response I wrote, "GSEs Have Been Ill-Served by Balance Sheet Equity Experiment," One excerpt:
[W]e know with absolute certainty why the GSEs' balance sheet capital remains close to zero. The Federal Housing Finance Agency engineered it that way. It chose to reduce Fannie and Freddie's equity by $250 billion in order to fund cash dividends to the Treasury. Irrespective of what Bright or anyone else thinks, the FHFA's decision-making could never be described as normal. It is never normal for an undercapitalized, regulated financial institution to pay cash dividends. It is never normal for a conservator to authorize any cash dividends prior to the company's emergence out of conservatorship.
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