7 months ago
Trump's Housing Finance Chief Expands Mortgage Bond Purchases
The head of a government housing finance agency, Bill Pulte, allowed two big lenders, Fannie Mae and Freddie Mac, to buy almost double the amount of mortgage bonds they were previously allowed.
This could help lower mortgage rates, but some people are worried it might be risky.
Pulte says the lenders won't buy more than President Trump originally said, but others think this might not help much in the long run.
Some politicians and experts are concerned that this could lead to problems, similar to what happened before the financial crisis.
The lenders might use this to make more money before they go public, but they might need to borrow money to do so.
FHFA granted Fannie Mae and Freddie Mac authority to hold up to $225 billion in mortgage bonds each, nearly doubling the previous cap.
The change could increase bond purchases by $170 billion over Trump's initial $200 billion instruction.
Pulte denied exceeding the $200 billion limit, calling the news 'fake' and stating the lenders would not exceed Trump's order.
Congressional members and experts raised concerns about increased risks and the fleeting benefits of the bond purchase.
The move reverses nearly two decades of bipartisan consensus to limit the lenders' bond portfolios after the 2008-09 financial crisis.
- Who
- Bill Pulte, Trump's federal housing finance director, and Fannie Mae and Freddie Mac.
- What
- FHFA granted lenders authority to nearly double mortgage bond purchases, raising concerns about risk.
- Where
- United States, involving federal housing finance agencies and lenders.
- When
- The change was effective immediately as of January 12.
- Why
- To try to lower mortgage rates, but critics argue it may increase risks and have fleeting benefits.
Key facts
- Authority Granted
- FHFA allowed Fannie Mae and Freddie Mac to hold up to $225 billion in mortgage bonds each.
- Previous Cap
- $40 billion per lender.
- Potential Increase
- $170 billion over Trump's initial $200 billion instruction.
- Consultation
- Unclear if Trump or Treasury Secretary Scott Bessent were consulted.
- Congressional Concerns
- Some members of Congress raised concerns about increased risks and fleeting benefits.
- Pulte's Statement
- Denied exceeding $200 billion, called it 'fake news'.
- Fannie Mae and Freddie Mac
- Government-backed lenders subject to additional regulation and lower borrowing costs.
- Potential IPO
- Lenders may boost earnings before an anticipated initial public offering.
Quotes
Bill Pulte
US President Donald Trump’s federal housing finance director
“FHFA simply gave each entity legal flexibility to go beyond their previous caps. Despite the lenders’ new bond purchasing authority, they would not exceed $200 billion.”
CNBC TV 18
Sen. Elizabeth Warren
Top Democrat on the Senate’s banking committee
“This is just a smoke screen for Trump and Bill Pulte to tweet about — it will do little, if anything, to lower mortgage interest rates over the long term and raises questions about increased risks to Fannie and Freddie.”
CNBC TV 18
Jim Parrott
Former member of the National Economic Council during Barack Obama’s presidency
“It does raise the question of whether we’re letting the genie back out of the bottle. That wouldn’t be so worrisome if the genie hadn’t done so much damage the last time around.”
CNBC TV 18
Edward Pinto
Resident fellow at the American Enterprise Institute and former Fannie Mae executive
“It may have an effect, but it will be fleeting. It’s easy for the federal government to make a mistake here. They’ve done it in the past.”
CNBC TV 18
Sources
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