When Craig S. Phillips, a veteran Wall Street Loan Dealer, agreed to become a Treasury Secretary to Steven Mnuchin's Secretary of Finance in 2017, his mandate was to revise the way US loans are guaranteed and then traded by the federal government. .
More than two years later, with the ambitious agenda far from fruition, Mr. Phillips goes back to the private sector.
Herr. Phillips told the Treasury staff on Thursday that he was planning to leave the government next month, according to a person familiar with the call that was not authorized to speak publicly. He informed colleagues that he expected to return to Wall Street, but had not made a new job.
Within two and a half years of the Treasury, Mr. Phillips helped create a blueprint for relaxing financial regulations imposed after the financial crisis of 2008.
His resignation gives uncertainty about the fate of Fannie Mae and Freddie Mac, the two gigantic loan financing companies that have been in government management since the crisis. Companies provide guarantees for most US mortgages, making it much easier and safer for banks to provide customers with affordable mortgage rates.
He is critically important, says David Stevens, former CEO of the Mortgage Bankers Association. "He knows these things inside and out, and he's in a real power seat."
Mr. Phillips, who was among the first people on Wall Street to ever pack and sell mortgages to investors, is expected to apply his experience to the problem of how Fannie and Freddie return to private hands, instead of operating under federal control.
Prominent investors had pointed out that Mr. Phillips, who spent 12 years at Morgan Stanley and drove the investment bank's mortgage card before the 2008 financial crisis, would strengthen Fannie and Freddie with taxpayers' money and then release them into private investors without making basics changes in the companies' structures.
Investors snapped up Fannie and Freddie's shares in anticipation. One of the big players was the Pershing Square Capital Management, funded by William A. Ackman, who first took stock of the shares in 2013. The fund had 116 million Fannie shares at the end of March, according to FactSet securities, a data provider. This position is currently worth more than $ 300 million.
Shares in both Fannie and Freddie have more than doubled this year, even though they are still well below the pre-crisis level.
But the overhaul of Fannie and Freddie has proved to be a complicated and politically tough task. The Obama administration tried and failed. Congress is deeply divided into the problem, which has the potential to affect the lives and finances of tens of millions of Americans.
This year, Trump administration employees have attempted to jump on the overhaul but with limited results. 19659002] Mr. Phillips and other State Secretaries have met the largest US banks to decide how to raise funds for Fannie and Freddie – a prerequisite for releasing them from government control – as well as how the housing finance system can be restructured, according to two attendees.
Mark Calabria, the recently confirmed leader of the Federal Housing Finance Agency, who oversees Fannie and Freddie, said in a speech this week that he had the opportunity to release the companies back to the private sector. But he said Congress would have to act to make such a plan viable by empowering the agency to better regulate the privatized companies.
Herr. Phillips is not the only trusted Mr. Mnuchin on the way out. Treasury's assistant secretary for international markets, Heath Tarbert, is appointed head of the Commodity Futures Trading Commission and will leave provided he is confirmed by the Senate. And Eli Miller, who was Mr. Mnuchin's Chief of Staff, left in April to join the private equity firm Blackstone.