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Trump memo calls for additional GSE-reform plans

With the Senate banking committee on Wednesday discussing the latest reform plan to move Fannie Mae and Freddie Mac out of government conservatorship, President Donald Trump fired a salvo of his own from the Oval Office.

TrumpThe president signed a memo Wednesday directing the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development to propose their own reforms for the two government-sponsored enterprises (GSEs). The memo serves as the president’s first official call to end the conservatorship of Fannie Mae and Freddie Mac.

According to the memo, “the administration wants to work with Congress to achieve comprehensive reform that improves our housing finance system.” Trump said that such reform should include both legislative and administrative fixes, signifying that Congressional action remains the ideal approach.

Yet, action on the GSEs has been glacial, due to the struggles in agreeing to comprehensive reform with bipartisan support.

The big message is in the memo’s wording: While the White House “wants to work with Congress” on the matter, the memo is a clear shot that the administration feels it can accomplish its goals without Congressional support.

The memo also called for the Treasury Department to identify proposed reforms that can be enacted without Congress, as well as a timeline for application.

The pressure wasn’t lost on the legislative branch. At the second day of hearings over Idaho Republican Sen. Mike Crapo’s most recent GSE-reform outline, Sen. Mark Warner, D-Va., said that “the notion that this may be taken away from Congress is, I think, a concern.”

Witnesses and lawmakers at the hearings were fairly uniform in the belief that recapitalizing Fannie Mae and Freddie Mae, then releasing them from conservatorship without further accompanying reforms is the wrong way to go.

Meanwhile, Mark Calabria, Trump’s pick to head the Federal Housing Finance Agency, waits for full Senate confirmation. Calabria is expected to clear that hurdle next month, paving the way for him to steer GSE reform. Trump’s memo appears to be a directive that he can do so without Congress, if necessary.

The memo also outlines key provisions within the potential reform measures, including the preservation of 30-year mortgages — something Calabria has proposed eliminating in the past while commenting for a libertarian media outlet. Other conditions in the memo include further enhancing the GSEs’ capital, as well as restricting the range of mortgages backed by the two enterprises.

There was no deadline specified within the memo, but it did call for a proposal “as soon as practicable.”


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