Hoisted from Comments: Robert Waldmann:
More On Principal Reduction: A New Initiative From the White House That Should Help Clear the Path: Good move. DeMarco can block things so it is necessary to give him what he demands. But his view is odd. I think that Berstein is right that he demands "some way to mitigate the losses to the agencies (and the taxpayers) from the loan forgiveness" by transferring money from the taxpayers to the agencies (and the taxpayers).
As a citizen (almost all of whose income is excluded by the foreign earned income exclusion) I stare and laugh.
Indeed. In DeMarco's mind, it is of vital importance that the shareholders of Fannie and Freddie--who are the taxpayers--not bear any losses on the value of their Fannie and Freddie equity as a result of principal reduction, but rather that any losses from principal reduction be born, instead, by the taxpayers.
And never mind that should principal reduction manage to work to reduce market failures in housing finance and strengthen the recovery, the principal beneficiaries--whose gains will absolutely dwarf any accounting entries in Fannie and Freddie's books--will be the taxpayers, who are the ultimate shareholders of Fannie and Freddie.