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Wednesday, December 09, 2020 9:26:44 PM
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Mnuchin Says He’s ‘Likely’ to Back Changes to Fannie and Freddie
By Joe Light and Saleha Mohsin, December 9, 2020, 4:08 PM PST
Treasury Secretary Steven Mnuchin said he would likely back changing a key agreement that outlines his agency’s suppo5Grt of Fannie Mae and Freddie Mac -- though he stopped short of providing any specifics.
Speaking to reporters on Wednesday, Mnuchin said he supports amending the companies’ bailout agreements “to set them on the right direction.” Revamping the accords, established after the government took control of Fannie and Freddie at the height of the 2008 financial crisis, is crucial to releasing them from U.S. control.
Federal Housing Finance Agency Director Mark Calabria, Fannie and Freddie’s regulator, has recently pushed for a sweeping amendment that would set them on an irreversible path to leave conservatorship, according to people familiar with the matter. Less-ambitious changes could set aside thorny issues -- such as how to deal with the companies’ legacy shareholders. They could also boost the amount of capital that Fannie and Freddie are permitted to hold.
Mnuchin offered no indication of how far he’s willing to go, only saying “there are changes that we will most likely make.”
Speaking to reporters on several different topics, Mnuchin said “the one area I feel like we didn’t make enough progress is on Fannie Mae and Freddie Mac.” He added that he still believes Congress should pass legislation to reform the housing-finance system.
“We’re going to create a blueprint,” said Mnuchin, adding that he had spoken to both Republicans and Democrats in the past few weeks.
Mnuchin also alluded to a case heard by the Supreme Court on Wednesday in which legacy shareholders of Fannie and Freddie are suing in an attempt to reclaim profits they say the government illegally directed to the Treasury. Mnuchin said that case and other issues must be resolved before Fannie and Freddie could raise capital in private markets, which they would need to endure losses outside of government control.
“If they rule in Treasury’s favor it simplifies things,” he said. “If they rule against, it’s still going to end up in litigation.”
The Supreme Court is expected to rule on the case by June of next year.
Published on December 9, 2020, 4:08 PM PST
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