GSE reform starts #Fanniegate war

by MPA09 Mar 2015
A war of words has erupted via Twitter between those who believe the government overstepped its bounds with the third amendment sweep of government-sponsored enterprise shareholder rights while adorning the hashtag #Fanniegate.

The conversation had been ignited after Michael Stegman, counselor to the secretary for housing finance policy with the Treasury, spoke at the Goldman Sachs Housing Finance Conference last Thursday. Stegman reported that the current status quo is “unsustainable and taxpayers are still off the hook."

Investment portfolios were nearly halved for Fannie Mae and Freddie Mac since the two companies went into conservatorship. They are required to shrink to less than $500 billion in total by the end of 2018.

“The critical flaws in the legacy system that allowed private shareholders and senior employees of the GSEs to reap substantial profits while leaving taxpayers to shoulder enormous losses cannot be fixed by a regulator or conservator because they are intrinsic to the GSEs’ congressional charters,” Stegman said. “And these charters can only be changed by law. That is why we continue to believe that comprehensive housing finance reform is the only effective way forward, not narrowly crafted ad-hoc fixes."

Critics say Stegman delivered the same spiel about how it was Congress’s responsibility to decide what to do with the companies and that the government was looking for ways private investors could play a bigger role in housing finance.

Investors Unite decided to way in on Stegman, “We’re encouraged that Mr. Stegman is finally being forced to address critical issues related to the undercapitalization of the GSEs, and how the government’s illegal Third Amendment Sweep is actually exacerbating this problem by taking all of Fannie and Freddie’s profits."

“But as it has been in the past, his analysis is wrong, and in conflict with HERA, which is the statute that actually governs the conservatorship," Investors United added.

Other critics have taken to Twitter to #Fanniegate their raging opinions.