Fannie Mae and Freddie Mac, well-known US insurers whose liquidity triggered the 2008 global financial and economic crisis and were nationalized by the State Department to prevent a general collapse of the real estate market, are back in private hands.
This is a proposal outlined in the real estate market reform plan, which, according to Reuters, was submitted by the US Department of Housing and Urban Development to President Donald Trump's administration on September 5 this year.
The Trump administration has already taken some steps in July this year to lift the special status lift for Fannie Mae and Freddie Mac, announcing that there will be no extension of special measures for these insurers from 2021.
The aforementioned real estate market reform report makes administrative and legislative recommendations to recapitalize Fannie and Freddie and end special measures for insurance companies, move competition in the housing market and protect taxpayers from future bailouts.
Despite the extremely negative publicity of Fannie Mae and Freddie Mac, Reuters recalls that both insurers, in 1936 and 1970 respectively, were founded by the US Congress. The idea, the agency adds, is that insurers take over a portion of commercial banks 'portfolio of loans to households to buy a home or apartment, thus expanding the banks' credit potential. According to the same source, two insurers paid $ 297 billion in state budget revenue in the first quarter of this year and have received $ 191 billion in aid so far.
Commenting on the privatization plans of Fannie Mae and Freddie Mac, Forbes Magazine notes that such decisions by the US presidential administration must receive Congressional support for what, the magazine estimates, have no time given the upcoming presidential election. According to Forbes, the Ministry of Housing and Urban Development is proposing to privatize these companies at the moment when their business ceases to pose systemic risk.
One of the measures implemented by the Federal Housing Financing Agency (FHFA) as a direct 'tutor' of the State Department at Fannie Mae and Freddie Mac is to control the salaries of their managers at $ 600,000 a year.