Subject: File No. S7-35-11
From: John J. McCauley
Affiliation: President, McCauley Investment Services

October 6, 2011

This is a follow on to the comments posted October 5, 2011.

Many comments from mREITs investors seem to consider mortgages backed by insolvent government agencies in Federal Receivership as a secure investment.

I, as a tax payer, do not feel compelled to provide additional capital to these insolvent agencies.

It is quite likely that many of the investors in highly leveraged mREITs would also agree that the insolvent government agencies should be put to rest once and for all.

The buyer of mortgages receiving insolvent agency guarantees should be aware that the growing Federal Deficit, in part caused by the insolvent agencies, and current Tea Party activism may prevent any future taxpayer capital rushing to the rescue.

Perhaps the SEC should consult with Congress as to the US Governments plan for these insolvent agencies and the increasing risk to the insolvent agencies as these excessively leveraged mREITs attract more and more capital, with their continuous secondary offerings, and potentially a ground swell of new public offerings to "Yield Hungy Investors".

If the insolvent agencies are to be unwound, then these mREITs will have to morph into non-agency mortgages. The mark to market value for existing agency mortgages will most likely decline when the agency is unwound, lowering the equity values of the mREITs which would increase the debt to equity ratios unless debt was reduced.

Perhaps there should be a warning similar to cigarette packages.

"Guarantees by insolvent government agencies possess extreme risk to capital."