Fannie Mae (FNMA)

[obiterdictum]

A. Mulvaney and Mnuchin agree with Corker, Warner, Crapo, etc. in that a legislative solution is necessary to finally get housing finance resolved. Neither nominee has said or even intimated (to my knowledge) any plan that would try to resolve the situation entirely via executive actions.

1. During his hearing when Sen. Warner and Crapo tried to obtain a committment from Mnuchin to support a legislative solution and not an executive bypass of Congress. Mnuchin was clearly non-committal.

SEN. WARNER: I APPRECIATE THE COMMENTS, I LOOK FORWARD TO WORKING WITH YOU. SINCE I TOOK MOST OF THE 30 SECONDS ON YOUR STATEMENT, I HAVE TWO QUICK QUESTIONS. I HOPE THAT YOU CAN ANSWER WITH YES OR NO. IN LIGHT OF THOSE COMMENTS ABOUT RECAP AND RELEASE, YOU COMMIT NOT TO SUPPORT ANY KIND OF ADMINISTRATIVE EFFORT THAT WOULD BYPASS THE CONGRESS IN TERMS OF EFFORTS TO RECAP AND RELEASE?

MR. MNUCHIN: I DON'T WANT TO MAKE ANY COMMITMENTS TO LEGISLATIVE OR NOT. WHAT I WILL COMMIT, BECAUSE IT IS MY RESPONSIBILITY AT TREASURY , AS IT RELATES TO CERTAIN ISSUES WITH FANNIE AND FREDDIE. WHAT I WILL COMMIT TO IS IT IS MY OBJECTIVE TO FIND A BIPARTISAN SOLUTION TO IT. I WOULD WELCOME THE OPPORTUNITY TO SIT DOWN WITH YOU SEN. WARNER

Video Clip of Sen. Warner's questions and Steven Munchin's answers concerning GSE Reform - 1/19/2017
https://www.c-span.org/video/?c4649494/steven-mnuchin-gse-reform

2. Mulvaney, during his hearing, agreed without specificity to Senator Corker's appeal for a legislative solution, saying "the law needs to change."

Review: Mulvaney Confirmation Hearing - GSE reform, executive action and legislation
https://www.c-span.org/video/?c4651913/mulvaney-confirmation-hearing-gse-reform

3. Mulvaney ignored Sen. Warner's misrepresentation of Mnuchin's view on a legislative solution. Mnuchin was non-committal towards a legislative solution or not. Mulvaney was clearly non-committal towards Sen. Warner's call for a specific legislative solution. Mulvaney focused on cooperation towards reaching the end goal.

Review: Mulvaney Confirmation Hearing - Sen Warner, GSE reform, executive action and legislation
https://www.c-span.org/video/?c4651917/mulvaney-confirmation-hearing

B. However these Senators want the status quo to continue, i.e. their desired solution can be only legislative. Basically "don't do anything until we do." Obama, Lew, Watt, and the other players in the previous administration went along with this.

4. Yes.

C. But Mulvaney responded to Corker by only saying "the law needs to change," so he didn't rule out the possibility of some executive action.

5. Yes. That is clear.

D. This is similar to Mnuchin denying having said the words "recap and release;" taken at face value it is a statement of fact.

6. Further, Mnuchin firmly approached the proposed idea of a legislative solution without an administrative bypass without any committment whatsoever by saying "I DON'T WANT TO MAKE ANY COMMITMENTS TO LEGISLATIVE OR NOT.

E. Given that Mulvaney has been shown to (at least recently, with the introduction of his bill) be in favor of recap and release, the fact that he evaded the Senators' questions with vague promises to work with Congress is heartening to me as a FnF investor. As with Mnuchin, this is not the time for Mulvaney to show his cards. They need to get confirmed, in place, and have some time with their new authorities to piece together what they actually want to do.

7. Agreed.

F. I wish one of Mnuchin or Mulvaney had responded to Sen. Warner with a statement that they are agnostic to hedge funds; they won't specifically try to help or hurt them when making decisions. But what they actually did, giving non-answers, is fine with me.

8. Yes. The same effect of agnosticism was achieved by being non-committal to a specific solution, legislative or otherwise.