Trump’s choice for Treasury Secretary, former Goldman Sachs partner and film producer (American Sniper and Mad Max: Fury Road), said that mortgage giants Fannie Mae and Freddie Mac should be released from the grip of the Federal government.
Liquidity moves markets!Follow the money. Find the profits!
If Mnuchin does make inroads into releasing Fannie Mae and Freddie Mac into the wild (or shut down), he will probably be nick-named “Duke Nuchin.” Or “The Munchkin,” I haven’t decided which, depending on what he is intending.
(Bloomberg) -By Kasia Klimasinska and Felice Maranz- Fannie up as much as 33% to highest intraday since Aug. 2014; Freddie up as much as 32%, also highest since Aug. 2014, after Steven Mnuchin, Donald Trump’s choice for Treasury secretary, says FNMA, FMCC should exit government’s grip, didn’t appear to mimic Republicans who’ve said they should
be wound down or eliminated.
* Mnuchin’s comments “certainly positive” for GSE pfd, common shareholders,’’ Height Securities analyst Edwin Groshans writes in note
* At the same time, “any path” that leads to GSEs exiting govt control needs to permit the GSEs to rebuild capital; estimates FNMA would need to raise at least $190b of capital, FMCC would need $119b in order to meet minimum risk-based capital requirements — which means no capital would flow to shareholders for a decade or longer
* Mnuchin has “significant powers” related to FNMA, FMCC conservatorship; tenure as head of mortgage bond trading at GS, role at OneWest demonstrate “significant background” in mortgage industry, FBR’s Edward Mills writes in note.
Here is the reaction in the stock market to Duke Nuchin’s comment.
The alternatives facing Duke Nuchin and Congress are 1) shut down Fannie Mae and Freddie Mac, 2) turn Fannie and Freddie loose in the wild with sufficient capital (either externally raised OR a Federal government “loan” with no strings attached), or 3) fold Fannie and Freddie into a Federal government insurance “corporation” per the Parrott, Ranieri, Sperling, Zandi, Zigas “A More Promising Road to GSE Reform” plan.
Someone mention a fourth option, making Fannie and Freddie a clone of FHA and Ginnie Mae (which is similar to the Parrott, Ranieri, et al plan. But one FHA/Ginnie is enough, thank you.
But whatever course Duke and Congress agree on, there has to be TRANSPARENCY as to what mortgage loans are being insured/purchased in terms of average LTV, FICO, and other measures (e.g. loan type).
Duke Nuchin is clearly preferable to being nick-named “The Munchkin.” But if he and Congress succeed in getting Fannie and Freddie loose from the grip of the Federal government, they can all sing together!!
Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.