The saga of the Fannie Mae and Freddie Mac’s very-profitable-for-the-federal-government is now more than 12 years old and counting. This is because, for all of everyone’s pious words about the importance of getting them out from under the public thumb, no one seems particularly interested in doing anything to make that happen. Not, in spite of its predictably loud but impotent pronouncements, the current presidential administration. Not the incoming one. And certainly not the U.S. Supreme Court.
“Do you think that if a provision of a massive statute is held to be unconstitutional, a person who is not in any way affected by that provision is entitled to relief?” Justice Samuel Alito asked the investors’ lawyer, David Thompson…. Justice Sonia Sotomayor said allowing a challenge to an agency action because it affected a company’s stock price would be a “sea change in how administrative challenges are litigated….”
[Chief Justice John] Roberts seemed to reject the investors’ argument that the companies had been “nationalized,” saying he checked the stock prices of Fannie and Freddie the morning of the argument and saw that they were respectively trading at $2.69 and $2.56.
“Your shares are not worthless,” Roberts said. “They’re worth something, presumably largely based on judgments about what the future holds. So doesn’t that render your sort of nationalization rhetoric just that, rhetoric?”
Now, we know that Treasury Secretary Steve Mnuchin is aware his days in that role are numbered, because he’s doing all he can to hamstring his successor’s ability to deal with the raging tire fire of an economy he and his boss are leaving behind. Yet in spite of that boss’ clear if also scattered and nebulous order that something be done about it, Mnuchin seemed to be in no rush. That is, until he heard just how badly the other side’s case went before the Supremes—his Treasury Department is officially opposed to ending the highly-lucrative profit sweep by judicial fiat.
Speaking to reporters on Wednesday, Mnuchin said he supports amending the companies’ bailout agreements “to set them on the right direction….” Mnuchin offered no indication of how far he’s willing to go, only saying “there are changes that we will most likely make.”
Still, it doesn’t sound like his hedge fund buddies will like what results.
Mnuchin said “the one area I feel like we didn’t make enough progress is on Fannie Mae and Freddie Mac.” He added that he still believes Congress should pass legislation to reform the housing-finance system.
“We’re going to create a blueprint,” said Mnuchin, adding that he had spoken to both Republicans and Democrats in the past few weeks.