An Analysis of Federal Policy Impacting the US Fixed Income Markets
GSE Reform
Policy Review
On September 7, 2008, at the height of the global financial crisis, the Federal Housing Finance Agency (FHFA), the federal government agency that oversees Fannie Mae and Freddie Mac, took control of the two mortgage agencies under conservatorship authority enacted under the Housing and Economic Recovery Act of 2008. The agencies have been operating under conservatorship ever since.  Once deemed a short-term relationship to help smooth the mortgage market, the conservatorship has now entered its 12th year, but some progress has been made to unwind the current relationship.  This relationship has been a profitable one for the United States Treasury. According to the Congressional Research Service, Fannie Mae and Freddie Mac have paid the US Treasury more than $292 billion in dividends through 2018 while under conservatorship.  In addition, the
Temporary Payroll Tax Cut Continuation Act of 2011
(P.L. 112-78) required Fannie and Freddie to raise their guarantee fees by 10 basis points each with the revenue derived from the increase paid to the Treasury Department. Between 2013 and 2018 Fannie and Freddie have paid a combined $16.5 billion to the Treasury under this mandate.  On March 27, 2019,
President Trump announced
that he directed relevant federal agencies to develop plans to reform Fannie and Freddie. The reform plan has the goals of recapitalizing Fannie and Freddie, ending conservatorship, improving regulatory oversight over the agencies, promoting competition in the housing finance market, and creating a system that encourages sustainable homeownership and protects taxpayers against bailouts. 
In November, Mark Calabria, Director of the Federal Housing Finance Agency announced that the agency would enact a capital building rule, following the BDA's request. However, this may be the extent of GSE reform for the coming years as the Biden Administration and House Leadership seem poised to block further action.
At a mid-November hearing with top Trump financial services appointees, Waters claimed, she and the Committee will fight to reverse the easing of financial rules that have taken place under President Donald Trump, calling the election of Joe Biden "the dawn of a new progressive America.”
The BDA examines current proposals and discusses the outlook for future reform in this document.
Policy Intel
Detailed Political Intelligence, BDA Advocacy, Tangential Activity, Current Status and Outlook
Fixed Income Insights