Fannie Mae (FNMA)

[obiterdictum]

I picked a link... and on it's introduction I stopped reading when I read this:

"The housing GSEs
contribute little to the quality of the U.S. housing finance system, yet they
create risks for the taxpayers and the entire economic system that cannot
be adequately addressed by regulation.1 A sound privatization program
should solve both problems, providing an improved housing
finance system and eliminating the risks that the housing GSEs—and particularly
Fannie Mae and Freddie Mac—create for the taxpayers and the
economy generally."

That's some Big Bank Bullcrap. You're telling me that for 80 years this company has built up the Middle Class and all of sudden a bunch of Big Banks flooded the market with Bad Loans, the GSE brings risk!!?

Is it any surprise that Peter J. Wallison, Thomas H. Stanton and Bert Ely would take this well worn point of view? Is it imagined that such privatization views are no longer those held in the main by the GSE reformers in the House and Senate? Their view is and has been a negative view of the GSEs and it is not dissimilar to the congressional legislation proposed by Hensarling, Garrett, Corker, Warners, Johnson, and Crapo that definitively sought to liquidate the GSEs and replace them with a new, untried financial entity centered around private competition that would somehow miraculously arrive with the 100's of billions in capital needed to replace the GSEs. These legislative efforts failed miserably.

Yet, during Mnuchin and Mulvaney confirmation hearings did not Warner, Corker and Crapo seek confirmation from the nominees that they would follow the path to GSE reform already cleared by them? These are Republicans leaders in the House and Senate and a cross-over Democrat leader in the Senate who still seek the liquidation of the GSEs (Garrett and Johnson are no longer have seats). It is better to be aware of this than to thrust our heads into the sand or to pull our hair out at the sound of these shrill voices or to celebrate when these types stand in the way of real change as did Obama's DOJ and Treasury and the FHFA.

The new administration brings hope to shareholders, investors and taxpayers for positive and meaningful change in the status quo were America wins and not just one favored group over the rest. It must be realized that the new administration still must face the legislative challenge of winning over the Republican House and Senate to their still unknown GSE reform plans that will get the GSEs out of the control of the government.

This is the same war cry of Peter Wallison, Stanton and Ely though their method of privatization is wholly undesirable. Know thy enemy. These three sought to reinvent the wheel by forming a one or more Mortgage Holding Subsidiaries, state-chartered general business corporations authorized to operate for profit and owned and controlled by commercial banks, thrift institutions, a bank holding companies or a financial holding companies (mortgage holding subsidiary parents) who will have an equity interest (i.e. Mortgage Holding Subsidiaries are like Mark Zandi's Mortgage Bond Insurance Corporations). The GSEs will transfer everything over to Mortgage Holding Subsidiary that will own, service, or securitize residential mortgages, but not originate them.

The GSEs charters will be made end, all new business activity will cease and the GSEs will dissolve within 5 years of the enactment of the bill they proposed to Congress. The suggested bill, in full, is at the end of the text.

Their plan does intend to give the shareholders of Fannie and Freddie an opportunity to realize the value of these assets, though it is uncertain how this is done except through a liquidation. At the conclusion of this outlined process, Fannie Mae and Freddie Mac will be liquidated and their charters ended. The GSEs will be succeeded by fully private companies that can engage in any activity, including the same businesses that the GSEs engaged in.

Does the new team of Trump (President), Mnuchin (Treasury), Sessions (DOJ), Mulvaney (OMB), Ross (Commerce) and Carson (HUD) plan something different? It is fervently hoped to be so. They have not announced a specific plan to get the GSEs out of the control of the government and, in this moment, day by day, we wait taking one style or another to pass the time while waiting.

It is useful to know what is, has been proposed by people like this to Senators and House Representatives who are not business people, in the main, and with few of them having any idea about mortgage and housing finance. The Congress typically has hearings with invited "experts" who suggest what they should as well as having private consultants who make the bills proposed in committee. Committee leaders than beat the drums to their colleagues to go along or to be against.

These plans were reviewed in 2013 when the Congress was hot to reform the GSEs and housing finance. There should be many posts about this on this forum back in the day.

See the link below on 26 GSE Reform plans.

Source:

Privatizing Fannie Mae, Freddie Mac, and the Federal Home Loan Banks - Why and How
https://www.aei.org/wp-content/uploads/2013/12/-privatizing-fannie-mae-book_172113483872.pdf

The Future of the Mortgage Finance System
https://www.economy.com/mark-zandi/documents/Mortgage-Finance-Reform-020711.pdf

The $5 Trillion Question: What Should We Do with Fannie Mae and Freddie Mac? - 26 plans
https://www.americanprogress.org/wp-content/uploads/2013/07/GriffithHousingTable-revised-1.pdf

Senate Hearings on Housing Finance Reform - 2013

Housing Finance Reform: Developing a Plan for a Smooth Transition
http://www.banking.senate.gov/public/index.cfm/2013/11/housing-finance-reform-developing-a-plan-for-a-smooth-transition

Housing Finance Reform: Fundamentals of Transferring Credit Risk in a Future Housing Finance System
http://www.banking.senate.gov/public/index.cfm/2013/12/housing-finance-reform-fundamentals-of-transferring-credit-risk-in-a-future-housing-finance-system

Housing Finance Reform: Powers and Structure of a Strong Regulator
http://www.banking.senate.gov/public/index.cfm/2013/11/housing-finance-reform-powers-and-structure-of-a-strong-regulator

Search Results
http://www.banking.senate.gov/public/index.cfm/search?q=Housing+Finance+Reform