Critics say capital is not necessarily the main impediment to ending the conservatorship. A bigger problem is the lack of planning on what the GSEs should look like after they exit.
Like most GSE reform plans, the hedge funder’s plan to privatize Fannie and Freddie starts with Treasury writing down its senior preferred shares and FHFA sharply reducing the capital requirements for the GSEs.
Smaller shops may support an end to the GSE conservatorships, but only if it’s done in a way that preserves pricing parity, avoids additional charters and maintains the cash window.
FHFA under the leadership of Bill Pulte has rescinded, deleted or closed at least eight agency directives without providing notice on the agency’s website or announcing the changes in a press release.
The new FHFA director’s whirlwind first week resulted in widespread staffing cuts at the regulator and a dramatic change in leadership at the GSEs. So far, criticism has been muted.
Three Democrats joined Senate Republicans in a vote to make Bill Pulte, the grandson of the founder of homebuilding giant PulteGroup, the chief regulator of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Executives from Annaly and Two Harbors worry that ending the conservatorships of the GSEs could fundamentally change the buyer base for their mortgage-backed securities.
A 2021 SCOTUS decision made FHFA just another agency of the executive branch. That means Trump can meddle with any GSE policies and programs he chooses.
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