A decade after Fannie Mae and Freddie Mac were placed During government control, a central Senate Republican proposed on Friday, so that they could again be private companies.
Senate proposal Mike Crapo (R-Idaho), head of the Senate Bank Committee, marks a potentially important turning point in the debate on futures of housing finance giants. Fannie Mae and Freddie Mac return more than half of the country's mortgage, and lawmakers have been cautious about tinkering with their structure, fearing a mistake could interfere with the housing market and the availability of 30-year mortgages.
The proposal provides a potential fall for hedge funds and other investors who have spent many years lobbying in the White House and Capitol Hill to deal with the problem. In particular, Wall Street is concerned that both companies, which received billions in taxpayer's bailouts, are sending profits to the US Treasury instead of shareholders.
"It is hoped that since the government got so much back that they want to recapitalize Fannie and Freddie, and allow the shareholders to receive what they deserve and what every other shareholder in every other financial company has received, the hedge fund's billionaire John Paulson says in A rare interview with podcast "According to Sources" last month, shareholders of Fannie Mae and Freddie Mac, even included, have not received dividends over 10 years, said Paulson, best known for making a $ 15 billion bet on the housing market and is among President Trump's biggest supporters on Wall Street. "Shareholders have been completely destroyed," he said.
Fannie Mae and Freddie Mac's stock prices increased more than 5 percent in minutes after Crapo's proposal was released.
" We must speed up our misdirected home financing system "Crapo said in a statement." My priorities are to establish stronger levels of protection for taxpayers, maintaining a 30-year fixed-rate mortgage , increasing competition among mortgage guarantees and promoting access to affordable housing. "
The debate comes at a sensitive time in the US housing market. Housing prices and sales have largely resumed from the housing bust. But the market has lowered as the mortgage rate has begun to rise.
President Trump has nominated Mark A. Calabria, chief economist for Vice President Pence, to run the government agency that oversees the home loan giants. Calabria has been a critic of the companies and is expected to make extensive changes if confirmed by the Senate.
Crapo's suggestion raises questions about whether Fannie Mae and Freddie Mac missed, including how much capital they have to hold, and must be converted into legal language. It is also unclear whether there is enough political will to cope with such a complex problem before the 2020 election when so many efforts have failed. Later, Sherrod Brown (Ohio), the Banking Committee's rank Democrat, did not send up Crapo's proposal directly, but said he would "fight to ensure that any efforts to reform the housing market begin to cope with the affordable crisis that is hurting for many tenants and homeowners. across the country
The government took control of both companies in 2008 when the housing market was rolled up, and the companies' losses rose, taxpayers pumping billions into the companies, but over the last few years Fannie Mae and Freddie Mac have collected Treasury-funded profits The corporations are buying lenders' mortgage and packing them into securities to sell to investors
In recent decades, they have received $ 191.4 billion from taxpayers and repaid $ 285.8 billion in dividends to US Treasury. Discontinued state control of the companies is among the last parts of unfinished businesses from the global financial crisis.
Some legislators have tried to abolish the companies and allow the banking sector to fit. Under Crapo's proposal, Fannie Mae and Freddie would no longer be protected by taxpayers, and its regulator, the Federal Housing Finance Agency, would undergo reforms. The companies could face new competition. The proposal will also establish funds to handle affordable housing.
"This is an attempt to make structural reform without the average consumer knowing the difference. Nothing changes for consumers when he or she enters a bank," said Ed Mills, a Washington-based political analyst with Raymond James. But if not done correctly, it can interfere with the market, including raising the mortgage rate.
"By keeping Fannie and Freddie around, the plan effectively ensures that there is no disruption to government support for mortgages and housing markets – which can not happen if you try to eliminate them overnight," says Guy Cecala. publisher of Inside Mortgage Finance.