Rosner PPT Wharton/NYFed Conference March 18 2015http://www.scribd.com/doc/259147917/Rosner-PPT-Wharton-NYFed-Conference-March-18-2015#scribd
The Future of the U.S. Housing Finance System: Bringing the U.S. Residential Mortgage Finance System into the 21st Century
Joshua Rosner Graham Fisher & Co.
March 18, 2015
If FHFA Does Its Job, Legislation Becomes Easier
Congress should ensure that the GSEs’ regulator places safety and soundness of these companies as primary.
Replace the current regulatory oversight with a Public Utility Commission responsible for determining allowable rates of return:
Any income above that rate of return would go to enhance capital.
Any income above the enhanced capital requirements would be split between dividends and an affordable housing trust fund.
With capped rates of return the GSEs would not have the deep pockets with which to lobby legislators, thus avoiding much of the basis for capture.
Use stringent methods to price guarantees, separate from the GSEs and from political influence.
This would create incentives for increased private market, unwrapped issuances on which investors would be forced to retain the risk (eliminating the broad government guarantee);
Sever the government’s sponsorship to end the provisioning of an implied government guarantee;
Ensure that GSEs can function in a counter-cyclical environment, the GSEs are regulated in the same manner as other utilities providing essential public services.
“A public utility model offers one possibility for incorporating private ownership. In such a model, the GSE remains a corporation with shareholders but is overseen by a public board. Beyond simply monitoring safety and soundness, the regulator would also establish pricing and other rules consistent with a promised rate of return to shareholders”
Federal Reserve Chairman Ben Bernanke (October 31, 2008)