jlaw277

From Tim Howard: "The confusion over the “privatization” comment stems from the fact that different people use the same term to mean different things. Currently Fannie and Freddie are de facto nationalized companies. Secretary Mnuchin has said he wants to get them “out of the government.” Those who advocate their reform, recapitalization and release often refer to the end state of that process as “privatization,” meaning the companies no longer would be owned by the government but (again) by their private shareholders. But there also is a faction in Congress–of which Jeb Hensarling, chairman of the House Financial Services Committee, is a prominent member–who use the term “privatization” to mean the removal of the attributes in the companies’ federal charters that other “fully private” companies do not have. I suspect that Mnuchin now is aware of the dual, and opposing, meanings of the word privatization, and thus won’t allow himself to be characterized as being for or against it." https://howardonmortgagefinance.com/2017/04/25/narrowing-the-differences/#comments Thank you very much! This is very helpful! I also scrolled down and read some of his additional comments. Very good! More from Howard: "Again, taken in context, I don’t read anything new (or troublesome) into this part of his comment. I think he’s trying to support the case for “getting Fannie and Freddie out of the government.” After saying that we need “to make sure there’s ample credit for housing,” he adds “but we also want to make sure that we don’t put the taxpayers at risk.” It’s then that he makes the remark you reference: “As you know, right now those two companies only exist because we have a giant line of credit from the Treasury that supports them.” For me, the key phrase in that last sentence is “right now.” Unlike officials in the Obama Treasury, Mnuchin is not saying that the only reason Fannie and Freddie survived the crisis is the $187 in senior preferred stock they got from the government between 2008 and 2011. If he did say that it would be problematic, because it isn’t true. In my interpretation, though, by saying “right now” he’s drawing attention to the fact that the companies have almost no capital today (due to the net worth sweep), and because of that absence of capital the only reason that they can stay in business is the Treasury line of credit. Without Fannie and Freddie having capital of their own the taxpayers ARE at risk, and that’s what he wants to change (in my view, by reforming and recapitalizing them)." https://howardonmortgagefinance.com/2017/04/25/narrowing-the-differences/#comment-3315

From Tim Howard: "The confusion over the “privatization” comment stems from the fact that different people use the same term to mean different things. Currently Fannie and Freddie are de facto nationalized companies. Secretary Mnuchin has said he wants to get them “out of the government.” Those who advocate their reform, recapitalization and release often refer to the end state of that process as “privatization,” meaning the companies no longer would be owned by the government but (again) by their private shareholders. But there also is a faction in Congress–of which Jeb Hensarling, chairman of the House Financial Services Committee, is a prominent member–who use the term “privatization” to mean the removal of the attributes in the companies’ federal charters that other “fully private” companies do not have. I suspect that Mnuchin now is aware of the dual, and opposing, meanings of the word privatization, and thus won’t allow himself to be characterized as being for or against it." https://howardonmortgagefinance.com/2017/04/25/narrowing-the-differences/#comments

From Yves Smith at Naked Capitalism, FWIW: http://www.nakedcapitalism.com/2015/12/the-continuing-fight-over-fannie-and-freddie-and-the-real-problem-of-us-mortgages.html