Skip to main content

Ever since the federal began bailing out Fannie Mae and Freddie Mac to the tune of $187 billion, in the process taking an 80% stake in the up to that point merely government-sponsored mortgage giants, and also all of their profits, ideas have been bandied about regarding what to do with them. The hedge funds that bought up their shares for pennies in the aftermath of 2008 think they should be recapitalized and reprivatized, preferably with that implicit promise of explicitly government funding should the shit hit the fan once again, which is not at all improbable, especially when you consider that one of the two can’t even figure out how to pay for its own new building, let alone many millions of buildings across this great land. Some of the more firebrand-y Republicans in Congress want to just blow both Fannie and Freddie to smithereens and let the free market sort things out, because that is the kind of thing that gets Freedom Caucus members exceedingly excited. Some less anarchistic Republicans think Fannie and Freddie should be preserved, but cut down to size, perhaps as simple mortgage guarantors without the kind of scale that requires $187 billion bailouts. President Trump just wants to do something, and so his administration is considering literally all of those options except—as is their practice—the one that makes the most sense, which is just to leave things as they are, since it seems to be working out pretty well for everyone except the hedge funds, and who gives a shit about those guys?

Anyway, in light of the president’s order to do something, the new guy in charge of Fannie and Freddie is, uh, doing something. Specifically, his plan appears to be to do all of the aforementioned things in some gigantic, hideous Frankenstein’s monster solution to what may not really be a problem at all.

He hopes to eventually tear up the firms’ federal charters and put them on a level playing field with would-be competitors…. He has no immediate plans to curtail the existing sweep of the companies’ profits to the Treasury Department, part of an arrangement related to the firms’ conservatorship….

Mr. Calabria, who has raised concerns about excessive risk among some mortgage borrowers, said a “top five priority” for him would be to deal with a program that allows more highly-leveraged home buyers to obtain Fannie and Freddie-eligible mortgages…. Changing the patch would be a key tool to shrink Fannie and Freddie without a full overhaul, but Mr. Calabria said he wasn’t set on doing away with it.

What an incredible plan: change everything and nothing. And Calabria’s even got a plan to implement the plan, whatever that plan is once Larry Kudlow finishes making it.

With help from Congress….

Yes! Of course! Congress. They certainly haven’t been consulted on this problem, and definitely haven’t done absolutely nothing about for more than a decade, and are sure to want to refashion an enormous segment of the U.S. economy touching pretty much every single voter (and every single voter’s idea of what constitutes the American Dream) in the run-up to a presidential election, and will no doubt be able to get Alexandria Ocasio-Cortez and Mark Meadows on the same page as Mitch McConnell and Chuck Schumer on what that segment should look like. I see nothing that could go wrong with this plan of plans.

Advancing legislation to refashion the nation’s $10 trillion mortgage market is a heavy political lift and may yet sputter, as prior efforts have. Mr. Calabria acknowledged it would be an “uphill fight” to muster the bipartisan support needed to act ahead of the 2020 presidential election. Still, he said there is widespread recognition the existing system isn’t tenable.

Trump-Appointed Official Promises Full Push to Overhaul Plumbing of Mortgage Market [WSJ]


(Getty Images)

Steve Mnuchin Wants To Stop Taking All Of Fannie And Freddie’s Profits, He Just Wants To Talk About It A Little More

You hedge fund guys have waited 10 years. What’s another couple of weeks or months or however long it takes two people under orders to do something to do it?

Not as sturdy as it looks.

Fannie Mae, Freddie Mac Are Back And, Uh, Pretty Much The Same As Before

Turns out they just needed $187 billion and 10 years in time out, not any fundamental changes.

CEOs At Fannie and Freddie Want Raises, Are Surprised That Everyone Is Super Pissed About It

Come on, they only almost broke the economy that one time... Almost.