Fannie Mae-No Politics (FNMA)

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GSE Reform is Dead, Here’s Why

Okay, Maybe a 20 Percent Chance of Passage

What’s Riskier ? GSE Stock or Bitcoin ?

Friday ... JAN 19, @)!& ... By Paul Muolo... [e-mail]



If you thought that GSE reform had a good chance of passing this year, think again. Friday morning, industry lobbyists were perplexed about new reports that Senate Republicans were leaning toward a reform plan that entailed placing Fannie Mae and Freddie Mac into receivership as a transition to a new housing-finance system, one with multiple guarantors. The belief is that the GSEs would be killed outright. As one trade group official noted: “There is no vote count for receivership. There is not a single Democrat who will vote for this…”

As the weekend approached, the Senate Banking Committee had yet to unveil its version of GSE reform. Rep. Jeb Hensarling, R-TX, is working on his version of reform legislation, which would make Ginnie Mae the king of the secondary market while eliminating Fannie and Freddie…

Speaking at a Thursday luncheon sponsored by Women in Housing and Finance, Treasury counselor Craig Phillips said the Trump White House is “extremely committed” to housing-finance reform and favors reform objectives outlined this week by Federal Housing Finance Agency Director Mel Watt. (Reporting by Carisa Chappell / [e-mail].)

In a seven-page document provided to the Senate Banking Committee, Watt and his staff call for Fannie and Freddie to be “reincorporated as private, shareholder-owned corporations with a regulated rate of return that would enter the market as the first two SMEs [secondary market entities] in order to help ensure an orderly transition to the new system…”

One veteran GSE lobbyist told IMFnews that he believes there is just a 20 percent chance of GSE reform being signed into law this year…

Keep in mind that the Treasury Department is the de facto owner of Fannie and Freddie, controlling all of their senior preferred stock. Depending on who you talk to, the common shares are worthless and the junior preferred is “almost” worthless – but that hasn’t stopped individuals and investment vehicles from speculating in these instruments…

POP QUIZ: If you’re a speculator, which would you buy: shares in Fannie and Freddie or Bitcoin ?
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