Mnuchin Says He Doesn’t Back Recap and Release of Fannie-Freddie

  • Treasury nominee says he won’t commit to GSE legislation
  • Says government should find bipartisan solution for housing

Treasury Pick Mnuchin Faces Heat at Senate Hearing

Steven Mnuchin, Donald Trump’s nominee to be the next Treasury secretary, said comments he made last year on Fannie Mae and Freddie Mac were not meant to endorse a view that the government should quickly recapitalize the companies and then sell its stakes in them.

“My comments were never that there should be recap and release,” Mnuchin said Thursday during his confirmation hearing before the Senate Finance Committee. “I believe that these are very important entities to provide the necessary liquidity for housing finance.”

Mnuchin’s comments, made in response to a question from Democratic Senator Mark Warner of Virginia, temporarily sent shares of Fannie and Freddie down by about 10 percent. The shares had mostly recovered as of 1:45 p.m.

Last November, Mnuchin said in a television interview with Fox Business that he thought Fannie and Freddie should be privatized and quickly leave government control. The companies jumped 46 percent after the remarks.

Guaranteeing Mortgages

Fannie and Freddie buy mortgages from lenders, package them into bonds and make guarantees protecting investors from default. The government took control of the companies during the financial crisis, eventually injecting $187.5 billion. Since 2012, the companies have sent taxpayers more than $250 billion in dividends.

At Thursday’s hearing, Mnuchin said, “we need housing reform so we shouldn’t just leave Fannie and Freddie as is for the next four or eight years under government control without a fix.”

He said he didn’t want to make any commitments on what policy surrounding the companies would be, including whether the Trump administration might try to take action on its own, instead of waiting for Congress to pass legislation.

The companies still have more than $258 billion in funding available from the Treasury, but under the current terms of the bailout agreement, must wind down their capital to zero dollars by next year. That means any small hiccup will require the companies to again require money from taxpayers.

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