Fannie Mae-No Politics (FNMA)

[whipstick]

Tim Howard again with the clarity source in comments

The confusion over the “privatization” comment stems from the fact that different people use the same term to mean different things. Currently Fannie and Freddie are de facto nationalized companies. Secretary Mnuchin has said he wants to get them “out of the government.” Those who advocate their reform, recapitalization and release often refer to the end state of that process as “privatization,” meaning the companies no longer would be owned by the government but (again) by their private shareholders. But there also is a faction in Congress–of which Jeb Hensarling, chairman of the House Financial Services Committee, is a prominent member–who use the term “privatization” to mean the removal of the attributes in the companies’ federal charters that other “fully private” companies do not have. I suspect that Mnuchin now is aware of the dual, and opposing, meanings of the word privatization, and thus won’t allow himself to be characterized as being for or against it.

On the Obamacare comment, it’s important not to take what Mnuchin said for more than what it was–a generalized statement of fact, with a political twist. Ms. Bartiromo said, “There is a conversation going on on Twitter…about how President Obama needed money for Obamacare and would take from all of the agencies and he took from Fannie and Freddie. Is that true?” And Mnuchin answered, “It IS true. They used the profits from Fannie and Freddie to pay for other parts of the government while they kept the taxpayers at risk.”

But note what really was said here. Bartiromo said the Obama administration took money from many agencies to pay for Obamacare, and Mnuchin agreed that the proceeds from the net worth sweep (which went into the government’s general revenue fund and thus were not earmarked for any specific purpose) were used to pay for “other parts of the government.” He didn’t say that sweep payments were used to fund Obamacare because that’s not knowable. Money is fungible. Once they go into the general fund, proceeds from the net worth sweep become indistinguishable from all other revenues that go into that fund, so it’s not possible to say which sources were used for which uses. The other point worth making here is that some on Twitter allege that the reason the Obama Treasury initiated the net worth sweep in August 2012 was to create a source of revenue to finance the subsidies in Obamacare. I am aware of no evidence that supports that contention.