The hashtag #Fanniegate is blowing up on Twitter, with a war of words between those who think the government overstepped its bounds with the third amendment sweep and those who think the government was well within its rights.

First a little recap, and a warning: GRAPHIC LANGUAGE.

Michael Stegman, counselor to the secretary for housing finance policy with the Treasury, said at the Goldman Sachs (GS) Housing Finance Conference Thursday morning that the current status quo is unsustainable and taxpayers are still on the hook.

“The critical flaws in the legacy system that allowed private shareholders and senior employees of the GSEs to reap substantial profits while leaving taxpayers to shoulder enormous losses cannot be fixed by a regulator or conservator because they are intrinsic to the GSEs’ congressional charters,” Stegman said.

“And these charters can only be changed by law. That is why we continue to believe that comprehensive housing finance reform is the only effective way forward, not narrowly crafted ad-hoc fixes,” he added.

Since Fannie Mae and Freddie Mac went into conservatorship, their investment portfolios have been nearly halved, and they are required to shrink further to less than $500 billion in total by year-end 2018.

Groups like Investors Unite disagree, saying that Stegman delivered his now-familiar refrain that it was up to Congress to decide what to do with the companies, and that the government was “looking for new ways” for private investors to play a larger role in housing finance. 

“We’re encouraged that Mr. Stegman is finally being forced to address critical issues related to the undercapitalization of the GSEs, and how the government’s illegal Third Amendment Sweep is actually exacerbating this problem by taking all of Fannie and Freddie’s profits,” Investors Unite says. “But as it has been in the past, his analysis is wrong, and in conflict with HERA, which is the statute that actually governs the conservatorship.”

This all came to an angry frothing head under #Fanniegate.

HousingWire takes no editorial position on the subject – we’re just reporting what’s happening now. The best exchanges came from author/investor and well-known analyst at Graham, Fisher & CoJosh Rosner, and Wall Street Journal scribe John Carney.

 

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