The FHFA completely controls the GSEs by law. Neither the President nor Congress can do anything directly to the GSEs while they are in the conservatorship.
If they could do something, it would have happened by now.
This federal law based fact is poorly understood by most. Leaving the conservatorship means leaving the statutory protection from Executive and Legislative Branch interference that is lawfully established by HERA 2008 under the FHFA.
Of course, it is imagined by many that if the GSEs leave the conservatorship, that things will be hunky dory. Not so. Leaving the conservatorship at this moment, this year is a more dicey move than keeping them in the conservatorship until the Congress has its head on straight. Wisely, DeMarco has not done so and has repeatedly stated that he will not until the Congress has its head on straight. It is assumed that Watt if confirmed, he will do the same as he said he would.
Please note carefully, that if the GSEs are released from the conservatorship without sufficient operational protections provided by the FHFA and a clear legislative agenda for them that supports them and existing stockholders, there will be unwanted problems and issues.
If the GSEs are released now or later, they will immediately come under the aegis of US Congress through the GSEs federal charters. The Congress could dissolve their federal charters and Fannie and Freddie would be GSEs no more and their existence as companies maybe challenged as well. Now one knows what will happen. These companies are so huge, not one or 10 politicans knows what to do with them in detail. They only know where they would like to see the money and profits go, where the revenue streams flow to and that place is the private sector and includes their buddies in the private sector that will benefit them in the future.
That dissolution scenario though legislatively possible is highly unlikely because the GSEs are the secondary mortgage market in the US and dissolving them means dissolving the secondary mortgage market in the US - a complete and irrevocable disaster. That is why Corker-Warner bill will fail. A bill cannot in any way address the the size and complexity of the GSEs. That bill is for talking about it and talking about it and talking about it. And while they talk and talk, the GSEs will continue on.
In any case, once the GSEs are released from the conservatorship, the Congress will be forced by their political agendas and views to reduce, restructure, or eliminate and create an alternative to them. There is no way to simply end them in one stroke.
That is what the Corker-Warner bill (not yet submitted to the Senate) and the Isakson bill and the Hensarling bill ( he has several and is now making another one that opposes Corker-Warner's gambit) all propose to eliminate Fannie and Freddie and to do that in one way or another. That is the Republican agenda. Neither the Adminstration's nor Democrat party agenda is known. It is nothing to speak of at the moment.
For all the media hyping of this bill, there really has been no progress in GSE reform and the cloud of smoke generated by the media explosion about the elimination of the GSEs will slowly fade away as it has for all the other bills.
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