GSEs To Stay Under Govt Control For Time Being

The Trump Administration announced Thursday that it would not seek to pull Fannie Mae and Freddie Mac out of conservatorship before President Trump leaves office next week. 

Instead, the Department of Treasury and the Federal Housing Finance Agency announced amendments to their preferred stock purchase agreements that allows Fannie and Freddie to keep more of their earnings as they continue to work to leave conservatorship.

“Today’s agreement that allows Fannie Mae and Freddie Mac to continue retaining earnings is a step in the right direction, but more hard work remains,” FHFA Director Mark Calabria said. “Capital at Fannie Mae and Freddie Mac protects the housing finance system and taxpayers. Retained earnings alone are insufficient to adequately capitalize the Enterprises. Until the Enterprises can raise private capital, they are at risk of failing in the next housing crisis.”

In a news release, the Treasury Department said Fannie and Freddie can raise private capital and exit conservatorship once certain conditions are met – effectively putting it off until after President Trump leaves office.

FHFA placed Fannie Mae and Freddie Mac under conservatorship – or government control – in September 2008 amid the housing crisis. Calabria has been taking additional steps in recent months to prepare the companies to emerge from federal control, with the Wall Street Journal reporting in November that Calabria was seeking to end conservatorship by the time President Trump left office.