Here are my results after doing some research on the timeline of release of the GSEs. Here is what I found about the process for releasing the GSEs.
1) They currently have a capital requirement the GSEs have to meet. Expect to meet the current levels by end of 2026.
2) Per the amended agreement the FHFA has to start a comment period on exit of conservatorship. This will probably take a few months to 6 months (or More) to complete.
3) The FHFA then has to brief the FSOC (A treasury department council) on the outcome of the comments on GSE exit of conservatorship. This could take a month or two schedule this action. (Source the treasury department website). There are several voting members on this council. And currently several members are "acting" until confirmed or replaced. Several members were appointed by the previous administration. One of the members is Jerome Powell (Chairman Federal Reserve). Whether or not FSOC gets to agree on release or just has to see the results of the comment period is unknown.
4) The Secretary of Treasury has to brief the president on the results of the comment period.
5) Then the Secretary of Treasury and FHFA get to make the decision on exit of conservatorship.
This is how the "Current" process for exiting conservatorship is written. For those of you who think the process can/should be rewritten, I can only say I hope not because then you basically toss any chance of release to the next administration or later.
So, what we should be hoping for is some reduction in capital requirements, based on a stress test. The capital requirements are the biggest obstacle for release at this point and the only valid argument for remaining in conservatorship.
The rest of the arguments are just more political theater.
Can the GSEs be relisted before exiting conservatorship? Yes...but with stipulations. The only question is whether or not an exchange will allow them to relist in conservatorship without regular shareholder meetings. Will they grant an exception? There is one thing we know, we will get notification if the GSEs seek to relist. The stock will pop on the request to release,
The only other option is an IPO style relisting where the GSEs get capital by adding additional common stock. They would not need shareholder approval to do this. The longer this does not happen makes the impact of taking this option less severe because the GSEs are whittling away the amount of money needed. Essentially, the longer this does not happen means there is less of a chance it will happen.
Bullish
AI
