A Treasury Department spokesman on Friday said the Obama administration wouldn’t consider ending government control of mortgage-finance companies Fannie Mae and Freddie Mac without legislation.
“The administration’s position has not changed,” the spokesman wrote in an email. “Comprehensive housing finance reform legislation is the only way to end the conservatorship responsibly and transition to a new system that brings stability back to the housing market while protecting taxpayers.”
The comment came after Sen. Tim Johnson (D., S.D.) in the opening remarks of a Senate Banking Committee hearing on Wednesday called on a top housing regulator to “engage with the Treasury Department in talks to end the conservatorship” of Fannie and Freddie if Congress doesn’t proceed with legislative reform.
Mr. Johnson had co-sponsored a bipartisan bill that would have overhauled the housing-finance system. That bill stalled in May after garnering limited Democratic support. Many political analysts have said legislative housing reform is unlikely to be a priority for next year. Mr. Johnson is retiring this year.
During the committee hearing, Federal Housing Finance Agency director Melvin Watt, who regulates Fannie and Freddie, said he viewed his agency as a bridge to legislative action. “Conservatorship cannot and should not be a permanent state. The role of Congress is to define what that future state is,” he said.
After the hearing, Mr. Watt seemingly left the door open to the FHFA and Treasury’s ending the conservatorship without Congress. “It’s something that would have to be initiated by Treasury, not by me,” he said. “In the short term I would rule it out, in the long term, I might not rule it out.”
Fannie Mae’s stock closed up 12% that day, while shares of Freddie Mac rose 11%.
The government placed Fannie and Freddie into conservatorship in 2008 after the companies suffered massive losses during the financial crisis.
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