Treasury Secretary Bessent’s cautious remarks about the prospect for GSE reform heighten industry skepticism about the release of Fannie Mae and Freddie Mac from conservatorship.
Although interest rates were higher on loans backing agency MBS in January, there was a small, if uneven, increase in issuance from the previous month. (Includes two data tables.)
The Federal Housing Finance Agency in recent years has done a better job than Ginnie Mae in interagency planning for a hypothetical nonbank crisis, according to the Government Accountability Office.
Actions by the Federal Reserve are helping to reduce volatility in the agency MBS market. Investors are comfortable with current conditions, with supply and demand seen as being in balance.
Obstacles like how to deal with the implicit guarantee and excessively high capital requirements make it unlikely that the GSEs will exit conservatorship under Trump, though the chances are higher than before his election.
The creation of a U.S. sovereign wealth fund could grease the skids for an end to the conservatorships of Fannie Mae and Freddie Mac.
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