HOUSE MONEY
Mnuchin: ‘Fix’ Fannie/Freddie, save ...
Thefuture of the American Dream may be up to Steven Mnuchin.
President-elect Donald Trump’s pick for Treasury secretary, who will have an enormous influence on how much mortgage holders will pay to own their homes, backed off a controversial plan to sell off taxpayer control of Fannie Mae and Freddie Mac.
The54-year-old Wall Street vet said during his confirmation hearing on Thursday that he “never” supported a plan that would sell off the government’s stake in Fannie and Freddie.
Instead, the former Goldman Sachs executive called for a broader reform in the housing markets.
“We shouldn’t leave Fannie and Freddie as is for the next four or eight years under government control without a fix,” Mnuchin said during the hearing.
“I believe we can find a bipartisan fix for these,” he added. “On the one hand, we don’t want a giant bailout. On the other hand, we don’t run the risk of completely limiting housing finance.”
The comments, ambiguous as they were, nonetheless shocked Wall Street.
Shares of Fannie and Freddie sold off around 11 percent in the minutes after Mnuchin made his comments. Both recovered a bit — with Fannie closing down 4.3 percent, to $3.78, and Freddie closing down 5 percent, to $3.63.
“The fact that heis now disavowing the concept that [Fannie and Freddie] be recapitalized and returned to the public is very worrying,” Dick Bove, an analyst at Rafferty Capital who owns Fannie stock, told The Post. “It raises the issue of, what does he really want to do with these companies?”
In November, Mnuchin told Fox News that “we gotta get Fannie and Freddie out of government ownership.”
“It makes no sense that these are owned by the [US] and have been controlled by the government for as long as they have,” he said then.
The privatization plan, called recap and release, is popular among hedge fund investors, including Bill Ackman, Bruce Berkowitz, Rich- ard Perry and Mnuchin’s pal and ex-partner, John Paulson.
But detractors say that plan wouldn’t be so simple.
“The reality is you can’t do recap and release,” Christopher Whalen, an analyst at Kroll Bond Rating Agency, told The Post .“The US taxpayer has put $200 billion into the two enterprises. You can’t just leave it there and let the ... trolls wander off with John Paulson.”
Mnuchin’s comments come one week after Ben Carson, Trump’s pick to lead Housing and Urban Development, said he thought companies didn’t need a government backstop to offer 30year mortgages.
“They all think that youcan privatize these things. You can’t,” Whalen said. “There would be no national market for 30-year mortgages.”
The US is one of two coun- tries where homebuyers can get a 30-year mortgage, in large part because Fannie Mae and Freddie Mac backstop risks for banks.
In other Wall Street-related testimony, Mnuchin said he supported the Volcker Rule, which prevents banks from trading with their own money, and keeping companies like Apple from parking money overseas.