The conservatorship of Fannie and Freddie Mac must end, not only for the sake of financial growth but also for the stability and prosperity of the housing market as a whole.
The conservatorship of Fannie Mae and Freddie Mac, which has been in place since the financial crisis of 2008, was initially implemented as a temporary measure to stabilize the housing market and prevent further economic turmoil. However, it has now become clear that this arrangement has outlived its intended purpose and is stifling the potential for growth and innovation in the housing finance system.
There are several compelling reasons why the conservatorship of Fannie Mae and Freddie Mac should be eradicated without delay:
- Market Efficiency: The continued conservatorship of Fannie Mae and Freddie Mac has created inefficiencies in the housing finance system, hindering competition and innovation. By returning these entities to the private sector, we can unlock market forces and encourage greater efficiency and dynamism in the mortgage market.
- Shareholder Value: Ending the conservatorship would likely result in a significant increase in shareholder value for Fannie Mae stock. As the market recognizes the potential for increased profitability and growth in a privatized Fannie Mae, investor confidence will soar, driving up stock prices and delivering substantial returns to shareholders.
- Access to Capital: Privatizing Fannie Mae and Freddie Mac would enhance their ability to access capital markets, enabling them to raise funds more efficiently and effectively. This, in turn, would provide greater liquidity to the mortgage market and expand access to homeownership for millions of Americans.
- Housing Market Stability: A privatized Fannie Mae and Freddie Mac would promote greater stability and resilience in the housing market by reducing the risk of government intervention and political interference. This would instill confidence among lenders, investors, realtors, builders, and homeowners, leading to a more robust and sustainable housing finance system.
Commenting on China’s current real estate crisis…
Chong Ja Ian, a China specialist at the National University of Singapore, says that a problem is the Chinese leadership’s impulse to address every problem by increasing control. “That might work in terms of a Leninist system and the individuals within an organization,” he says, “but it doesn’t quite apply to the market.”
Time Magazine (Oct. 5, 2023)
The U.S. government must take action during a crisis. However, such action should only be temporary and not prolonged indefinitely. There must be a concrete plan of action in place to move forward when circumstances change, and circumstances have certainly changed since 2008.
“Fannie Mae and Freddie Mac were placed into conservatorship in September 2008. They remain under conservatorship, which Lockhart said there’s no reason for, despite the fact he was the one who made the call years ago.” – James B. Lockhart III, Former Director Federal Housing Finance Agency
Fortune – Feb 20, 2024
In conclusion, the time has come to end the conservatorship of Fannie Mae and Freddie Mac and unleash the full potential of the housing finance system. Doing so will not only benefit shareholders but also promote a healthier and more vibrant housing market for the benefit of all Americans.
Fannie Mae and Freddie Mac should not continue to be undervalued and must be permitted to operate freely in the market. By ending conservatorship, it should reduce the cost of mortgages for future home buyers. Political awareness and action must be taken on this extremely important issue. Neither the American people nor the shareholders benefit from Fannie and Freddie being in conservatorship well after stability has been established.
I urge every American to advocate for the timely release of Fannie Mae and Freddie Mac back into the free market. If you have any questions or would like to discuss this matter further, please do not hesitate to comment below or contact me.
Disclosure: My family and I are shareholders of Fannie Mae – $FNMA and $FNMAO.
Useful Resources:
When Will Government Control of Fannie Mae and Freddie Mac End? (Part 1)
When Will Government Control of Fannie Mae and Freddie Mac End? (Part 2)
After 15 Years, the Federal Government Should End its Conservatorship of Fannie Mae and Freddie Mac
Fannie Mae 4th Quarter and Full-Year 2023 Financial Results
Fannie Mae Reports Strong Annual Net Income Growth of 35% for 2023
Rates rise | Mortgage rates for February 14, 2024
KTMC Wins Historic $612 Million Jury Verdict For Fannie Mae and Freddie Mac Stockholders – (currently being appealed)
United States Court of Appeals Rop vs. Federal Housing Finance Agency
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