Treasury Secretary Steven Mnuchin went against the regulator for Fannie Mae and Freddie Mac. The authority doesn’t agree with this party that stated that mortgage–finance giants should stop paying dividends. The pretext for such a claim was that these institutions need financial resources to operate as a standalone unit.
The Two Mortgage–Finance Giants Are Still Suffering the Consequences of 2008 Financial Crisis
Back in 2008, one of the cruelest financial crises impacted the United States directly. To mitigate this critical situation, two mortgage-finance giants became wards of the state. These institutions were Fannie Mae and Freddie Mac which entered under the supervision of a regulator. The idea was to preserve these conditions until they regained enough of their powers to become independent again.
However, these units continued to stay under government supervision, even now after nine years since the event. Fannie Mae and Freddie Mac are not healthy enough to make it on their own, and they still require a taxpayer bailout.
Mel Watt Is the Sole Regulator for Fannie Mae and Freddie Mac
In light of this situation, Treasury Secretary Steven Mnuchin confessed to the Senate Banking Committee that he is still expecting the two mortgage-finance giants to cover their dividends with the Treasury Department. This public statement went against the regulator’s vision. At the beginning of May, Mel Watt told the same committee that the status quo could not be supported anymore. The industry needs new regulations as the times have changed.
“These conservatorships need to end as soon as Congress can chart the way forward on housing finance reform.”
Fannie Mae and Freddie Mac are expected to pay their next dividends by the end of June. It is uncertain whether or not they would continue covering their federal taxes. Up to now, they funded the Treasury around $266 billion since 2008. Their upcoming dividends call for a total of $5 billion. The Director of the Federal Housing Finance Agency, Mel Watt, is the sole watchdog for these state pillars. However, these two companies are still bound to Treasury to return almost all of their earnings to taxpayers.
Image source: 1