Fannie Mae And Freddie Mac Regulator Discussing Plan To End Conservatorship

Joseph Otting is the acting director of the Federal Housing Finance Agency.

The acting director of the Federal Housing Finance Agency has told the agency’s employees that the regulator will announce a plan within weeks to take the government-sponsored enterprises out of conservatorship.

Joseph Otting, who is leading the FHFA as Mark Calabria awaits Senate confirmation, said at an all-hands meeting on Thursday that a plan to lift Fannie Mae and Freddie Mac out of the conservatorship that has permeated the institutions since the financial crisis will soon be announced, according to an attendee of that gathering.

A spokesperson for the agency confirmed there was discussion about ending Fannie and Freddie conservatorship but denied there was any talk of timing or details.

“Acting Director Otting held the internal meeting to meet FHFA staff and establish open lines of communication,” the FHFA said. “He mentioned, as he previously has, that Treasury and the White House are expected to release a plan for housing that will include details about reform and will likely include a recommendation for ending Fannie Mae and Freddie Mac conservatorships. [Treasury] Secretary Mnuchin has said that the goal of the [Trump] administration is to take the GSEs out of conservatorship. Acting Director Otting said that he and FHFA will work to advance that plan.”

Fannie and Freddie were rushed into government control at the height of the financial crisis. Then, in 2012, the terms of the 2008 bailout were amended to steer the quarterly profits of both enterprises to Treasury. That wiped out holders of the companies’ stock, and they’ve fought the federal government in court ever since.

Congress has made several attempts at reform, but has not succeeded. As previously reported, the business-friendly Trump administration has been expected to find ways to work around legislators. Once the Obama appointee Mel Watt, who ran FHFA until early January, departed, and Otting was appointed, the path cleared. What makes these efforts unique is that the White House seems to be determined to go it alone without Congress’s help.

Read: To free Fannie and Freddie, their regulator may bypass do-nothing Congress

The over-the-counter shares of both Fannie Mae FNMA, +26.67% and Freddie Mac FMCC, +22.65% have soared this month in anticipation of administration action, though it’s not clear these shareholders would be rewarded.

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