Steve Mnuchin: A Traitor To His Class

The Treasury Secretary is not looking after his fellow hedge fund managers and/or Fannie Mae/Freddie Mac shareholders.
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(Getty Images)

(Getty Images)

So far, Wall Street doesn’t have much to complain about vis-à-vis the job performance of one of its own, Treasury Secretary Steve Mnuchin. The Goldman Sachs veteran and former hedge fund manager helped unveil a tax plan that gets rid of the A.M.T. and inheritance tax, slashes capital gains and corporate taxes, preserves the charitable giving deduction and serves as a giant gift to millionaires and billionaires such as himself and his boss. He’s done his damndest to fill 1500 Pennsylvania Avenue with guys who look like the guys who will most benefit from that tax plan. And he’s made clear that the whole “bring back Glass-Steagall” that President Trump put into his platform didn’t really mean what bringing back Glass-Steagall, or anything really.

So you could understand why the hedge fund managers clinging to the hope that their shares in government-backed mortgage giants Fannie Mae and Freddie Mac might have been getting excited. Not only did Mnuchin run seemingly everything through at, “What would Wall Street do?” calculus, but he’s kind of a Fannie/Freddie shareholder himself. Surely, the not-at-all problematicplan to recapitalize the companies and restore them to the private sector would appeal to him, both philosophically and financially. Surely, Fannie and Freddie shareholders would get their companies back.

Well, if you’ve learned nothing else over the past four months, you’ve learned that nothing at all is certain in Donald Trump’s America. To wit: Steve Mnuchin’s working on a plan that’s going to make Bill Ackman very, very unhappy.

In an exchange last week with key Senators Mike Crapo (R., Idaho) and Bob Corker (R., Tenn.), Mr. Mnuchin said he would consider a government backstop for the mortgage market. “If there is a guarantee, we would want to make sure that there is ample credit and real risk in front of that guarantee, so that taxpayers are not at risk,” he said….

Under most of these plans Fannie and Freddie would still exist, but with a more limited role, perhaps as utility-like mortgage guarantors.

That may not be the most profitable outcome for Fannie and Freddie shareholders, but they are far from the only stakeholders in this debate.

Fannie and Freddie Endgame Takes Shape [WSJ]

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