"The plan would, in our view, short circuit ongoing efforts in Congress to change the mortgage finance system and deal with the GSEs. We think the Administration wants to give those efforts a chance to succeed," KBW analyst Brian Gardner said in a report.

Gardner adds that the fact that the private investors would get to keep all the "attractive" parts of the GSEs will be politically unpalatable.

"Even if FHFA and the Administration were disposed to accepting this type of plan, and we do not think they are, we believe any sale of GSE assets would be subject to some kind of auction or competitive bidding process. In our view, such a process would require an administrative rule writing and public comment period. Neither the Volcker rule nor the risk retention/QRM rules are finished over three years after Dodd-Frank was passed, so it does not require much imagination to see such a rule writing/auction process taking several years to conduct," wrote Gardner.

-- Written by Shanthi Bharatwaj New York.

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