Most consumers don’t think to themselves “I expect rates vol to rise in the future, so I’d better be long gamma right now.”

Only the smart ones do. When inflation overwhelms your rate, you effectively get your house for half price (inflation adjusted) after 15 years. The deal only keeps getting better from there. Such a ridiculous deal can't possibly exist without subsidy.

This is an economic structure that doesn’t particularly make sense: Fannie and Freddie are in the business of using the government’s implicit guarantee as a source of cheap capital; they borrow cheaply and lend not-so-cheaply, and pocket the difference — or used to. Now, the US Treasury pockets the difference. So, economically, what happens is that the US government issues debt, buys mortgages, and turns a profit on the gap. As far as anyone knows, the reason the deal’s legal structure doesn’t match that accounting structure is that Fannie and Freddie have a lot of debt, and the government doesn’t want to consolidate it on their balance sheet. So Fannie and Freddie are a highly-levered off-balance-sheet structured credit play.

Always can count on governmental accounting to think Enron were innovators.

Proponents of the GSEs note that while the GSEs wrote their assets down to the point of insolvency during the crisis, realized losses were lower; they wrote stuff back up eventually. But that’s an appallingly irresponsible argument. Anyone can make money on levered bets if the loans never get called in. Here’s a surefire strategy: lever up 20 to 1 in equity index futures. When you get a margin call, let it go to voicemail.

AHAHAHAHAHA