On July 30, 2008, President George W. Bush signed the Housing and Economic Recovery Act of 2008 (HERA), which established the Federal Housing Finance Agency (FHFA). One provision of that act gave the FHFA authority to place its regulated entities into conservatorship or receivership. Less than two months later, the government-sponsored enterprises (GSEs) were placed in federal conservatorship – and 15 years later, they are still there.
I just did a Google News search for the term “GSE reform” covering the past month and it brought up only two items – both from Fitch Ratings, and one of those items was removed from the Internet because there was an error in its contents.
I then did a regular Google search with the terms “GSE reform” and “Biden,” and the most recent item that came up was a Seeking Alpha article from June 27, 2022, that appeared shortly after Sandra Thompson became Biden’s FHFA director. Of course, I was setting myself up for failure on that – Biden’s staff has never written the words “GSE reform” on those oversized cards he fumbles with when he is trying to act presidential.
I followed that with a search on the FHFA website, using the term “GSE reform,” and the most recent mention of that subject occurred last March during an event called “FHLBank System at 100: FHFA Listening Session Day Three” – with the words “GSE reform” mentioned in passing.
When Fannie Mae and Freddie Mac were placed in conservatorship 15 years ago, the idea was to realign their failed machinery and send them back into the world – then-Treasury Secretary Hank Paulson called conservatorship a “timeout” for the GSEs while the nation was struggling with the housing bubble’s collapse.
For a while, there was an endless flurry of ideas of what GSE reform could look like. Some of those ideas were intriguing and some were appalling, but at least serious thought was being given to the issue.
Today, no thought at all is being given – at least not within the Biden Administration, Congress or the FHFA. Every now and then, a housing industry pundit or a bored fellow at a think tank raises a reminder of the conservatorship, but no one with access to power is listening to them.
And why should those in power think about this? As the folks at Fitch Ratings noted, “Fannie Mae and Freddie Mac continue to execute on their mission to provide liquidity, stability and affordability to the housing finance industry.” The Biden White House, not unlike its predecessors in the Trump and Obama Administrations, have taken the old “if it ain’t broke, don’t fix it” approach to GSE reform.
The current White House occupant and those trying to evict him in the 2024 election have not made any housing-related subject a priority in their respective campaigns, so it would be silly to expect to hear new ideas on GSEs in the presidential race. But as the GSEs observe their 15th anniversary in conservatorship, it is not hard to imagine they will also be celebrating their 20th, 25th and even 30th anniversaries in that state in the not-to-distant future.
The time for meaningful GSE reform has passed and too many people are comfy with the current set-up. But 15 years ago, who could have imagined that Hank Paulson’s “timeout” for the GSE would turn into a life sentence in conservatorship?
Phil Hall is editor of Weekly Real Estate News. He can be reached at [email protected].