First the Trump administration announced a “national emergency” in an effort to secure funds for a southwestern border wall without Congressional approval. Now, the Financial Times reports, the White House is moving to privatize the nation’s two largest mortgage guarantors, Fannie Mae and Freddie Mac, without Congressional approval.
Steven Mnuchin, the Treasury secretary, has previously said he wanted to achieve privatization with support from Democrats in Congress, but with Washington so bitterly divided, the Trump administration is weighing its options to act unilaterally. Fannie Mae and Freddie Mac guarantee roughly half of U.S. home loans and have been under government “conservatorship” since the height of the financial crisis in 2008. The arrangement gives the government control of the two entities but does not put their liabilities on the public balance sheet. Efforts to privatize them have repeatedly stumbled over a tricky equation: removing them from government control but ensuring that they underwrite loans for low-income households, all while protecting American taxpayers from risk.
Speaking at his confirmation hearing before the Senate Banking Committee last week, Mark Calabria, the administration’s nominee to run the housing regulator, said he thought the administration could recapitalize the two entities without having to secure congressional support. But he added that more meaningful reform, such as introducing new competition into the mortgage market, would need new legislation – and therefore cross-party backing.
“I do believe that the regulator can make a number of changes that can try and get the GSEs [government-sponsored enterprises] on a stable footing for the next downturn, when it inevitably comes,” Calabria testified. “But I believe that the fundamental things that need to be changed by the system have to be done by Congress.”
The Trump administration is, once again, considering going it alone. One person who has been consulted on the administration’s thinking said: “They want bipartisan support, but they know that is going to be difficult, especially with so many Democrats running for president. But there are plenty of things they can do without Congress giving its support.”
We’ll know soon if building a border wall is one of those things.
Thinking of buying a co-op or condo? Already bought, and not sure how co-op/condo life and rules work? Learn all about purchasing a place and living in your new community. It's not like renting, and its not like owning a house. What's it like?