After months of arguing that the US can’t afford to shut down Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), Rafferty Capital Markets VP of equity research Richard X. Bove is changing tack. This time he’s writing an open letter to President Obama that congratulates him on saving the GSEs and urges him to avoid the political and financial fallout from what could be their messy dissolution.

Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove

“As a consequence of what you did the American people were still able to conduct transactions in the housing market during the Great Recession. The 30-year fixed rate mortgage did not disappear. The declines in housing prices, devastating as they had become, were limited and actually began to recover relatively quickly,” writes Bove.

Fannie Mae, Freddie Mac bailout doubled taxpayers’ investment: Bove

Bove credits Obama’s decision to bail out Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) not only with saving the US housing market and reforming the GSEs, but with more than doubling taxpayers’ investment.

After spending $187.5 billion to save the GSEs, the Federal government has received $213.1 billion in dividends, and it still owns preferred securities that Bove’s values at $240 billion. Additional warrants to purchase 7.2 billion in common stock in the GSEs is worth $34 billion in today’s market, but Bove believes their value would rise to $153 billion if Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are re-privatized. Altogether, the US gets $416 billion in cash and stock from a $187.5 billion investment in about six years, “a staggering success in the financial arena.”

Some of that money would have to be returned if Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) or going to be made whole, both to recapitalize them and to pay dividends to preferred shareholders that Treasury has been avoiding, and many critics argue that this straightforward calculation doesn’t account for the implied credit extended by the US government, but the decision to bail them out was never really a profit grab anyway.

Bove doesn’t see what Obama is fighting for

“Yet, despite this big win, the government is fighting multiple groups in the courts,” Bove writes. “I do not understand this. I do not understand why the government is fighting these battles.”

For Bove, ending the conservatorship shouldn’t be controversial. Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) are important parts of the US housing market, it’s becoming clear that Congress won’t be able to enact meaningful reform anytime soon, and all the financial, political, and human capital that is about to be spent on a series of bitter lawsuits is better spent on something else.