GSE ‘Recap’ Experiment Is Just a Sideshow

According to a recent opinion piece in American Banker by Michael Bright of the Milken Institute, it is a simple statement to say Fannie Mae and Freddie Mac need more capital, and it detracts from the real debate over long-term housing finance reform.

The article, while explaining options for GSEs recapitalization, raises doubts about the prospect. “It would take over a decade for the GSEs to recapitalize themselves using retained earnings to the point of being anywhere near safe...Are investors who purchased their delisted shares really planning to sit tight for over a decade? Maybe…The more thoughtful ones also admit that they'd need to make an additional equity injection as well for the plan to work.”

Bright then goes on to explain where he thinks the real discussion needs to focus. “We need a real debate on the right role of government, competition, market forces and housing subsidies. That debate – not some recap sideshow argument – is the debate our country deserves,” Bright says.

As reported earlier, Steven Mnuchin indicated that once confirmed as Treasury Secretary, he plans on taking steps to recapitalize the GSEs and return them to the private market.

Read More

Share this:   Facebook  Twitter  LinkedIn  AddThis

wagers
Terms and Conditions | Privacy Policy