“The right answer is not to recap and release (Fannie and Freddie).” U.S. Treasury Secretary Jack Lew, October 19, 2015
“Absolutely the right decision. These entities exist only because of the federal government’s backing of their debts and their mortgage guarantee obligations. Why in the world should American taxpayers allow these entities to be private sector, for-profit entities again? (Private profits and public risks/losses!) The only ones advocating otherwise, are private equity firms looking to make a quick buck on the preferred and common equity they have purchased in these entities and the real estate and mortgage finance industrial complex….which is addicted to this form of crony capitalism. I am very passionate about speaking out with regard to this issue, because I see it as a big, personal career mistake…being in an industry that was so controlled and distorted by well-intended government guarantees and mandates (and interest rates). The U.S. single-family real estate and mortgage finance industry (and other housing advocates) need to stop “sucking on the government tit” and truly embrace privatization and free markets.”, Mike Perry, former Chairman and CEO, IndyMac Bank
October 19, 2015, John Carney, The Wall Street Journal
Obama Administration Slams Door Shut On Recap and Release of Fannie and Freddie
By John Carney
The Obama administration on Monday crushed rumors the mortgage giants would be recapitalized and released from the conservatorship they have operated under since September 2008. Such speculation drove shares of both companies, which are effectively wards of the U.S. government, sharply higher two weeks ago.
That had happened after a Washington, D.C. political intelligence firm released a report claiming the White House was “looking at options” that included “terminating conservatorship.” The report described this as “a major shift in thinking” about the future of Fannie and Freddie.
Now it is clear no such shift will be forthcoming. An opinion column by Treasury counselor Antonio Weiss on Monday described the recap-and- release push as “misguided.” He went on to say an end to conservatorship would only come through comprehensive housing finance-reform legislation. And that isn’t happening before the presidential election
That view was reiterated by Treasury Secretary Jack Lew on CNBC Monday. “The right answer is not to recap and release,” he said.
Michael Stegman, a top White House housing policy adviser, was expected to deliver a similar message in a speech later Monday.
The comments should also put to rest rumors the administration is moving toward settling lawsuits filed by hedge funds and other investors against the government over its handling of the companies. By all indications, the administration remains confident it will continue to prevail in those cases and isn’t looking to negotiate a resolution that would benefit the holders of Fannie and Freddie shares.
Messrs. Weiss, Lew, and Stegman have put the final three nails in the coffin. It’s time to bury the hope the administration will change direction on Fannie and Freddie.