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The Week Ahead: Senate Sets Sights on Fannie, Freddie

On Tuesday, the Senate Committee on Banking, Housing and Urban Affairs [1] will hold a hearing to examine whether Fannie Mae and Freddie Mac should be designated as systematically important financial institutions.

Currently, plans are being made to pull Fannie Mae and Freddie Mac out of conservatrship. In an interview with the Wall Street Journal, Federal Housing Finance Agency (FHFA) Director Mark Calabria stated that he wants to out the now-profitable GSEs back into private hands, something that has been tried and failed by lawmakers in the past.

“I see my goal as setting a path to end the conservatorship” for the companies he said, adding, “they have to be stronger, healthier companies” compared to before the 2008 housing crisis.

“My objective is to get us to a spot where we don’t have to worry about the system blowing itself up,” he added.

Earlier this year, The Wall Street Journal reported that the Trump administration is putting the final touches on [2] a plan to return Fannie Mae and Freddie Mac into private hands. The United States Treasury’s in-house process for drafting the plan is almost ready for sign-off from Treasury Secretary Steven Mnuchin, WSJ states, but it is not certain when the document is likely to be released to the public.

The plan is being developed by the Treasury with consultation from the FHFA. Calabria told CNBC that he does not intend to wait for Congress to pull Fannie and Freddie out of conservatorship, also noting how the FHFA will need to look at other ways to build capital before pulling the GSEs, and what shareholders may or may not need to worry about in the near future.

“If I can end the sweep, reach some changes to the share of Treasury, we can get them out of conservatorship, we can start to build capital, I can start to monitor loan quality, get them in a safe and sound fashion,” Calabria stated. “There’s a lot I can’t do: I can’t create competition, I can’t create a guarantee, those are going to be in the hands of Congress. I’m going to call for those things, but Congress has to play its part.”

Here's what else is happening in the Week Ahead.