The future of Fannie Mae and Freddie Mac is very much up in the air these days, as one of President Donald Trump’s top economic advisors said recently reforming the government-sponsored enterprise will be high on Steve Mnuchin’s agenda once he is confirmed as Secretary of the Department of the Treasury.

Mnuchin himself said back in November that “getting Fannie and Freddie out of government ownership” is one of the Trump administration’s top 10 priorities.

So it’s clear that the Trump administration has plans to move on GSE reform, but what isn’t known yet is just what those plans will look like and what impact those plans will have on the country’s financial system.

One area where the Trump administration’s GSE plans could have an impact is on the Federal Reserve, which began buying mortgage-backed securities from the GSEs in 2009.

Currently, per Fed data found here, the Fed owns roughly $1.75 trillion in GSE mortgage-backed securities.

But what happens if the GSE reform really does happen?

According to the Federal Reserve Bank of St. Louis President James Bullard, the Fed would seriously reconsider the amount of GSE MBS it holds.

Bullard’s comments were recapped in a Bloomberg report.

From the Bloomberg article:

Bullard repeated that he would like the FOMC to consider shrinking its balance sheet, which was bloated with several rounds of purchases of Treasuries and mortgage-backed securities in a strategy known as quantitative easing.

He added that reform of housing agencies known as government sponsored enterprises, or GSEs, could be a catalyst for the Fed to replace its holdings of mortgage-backed securities with Treasuries.

“Then we might not want to be holding MBS on the grounds that the successors to the GSEs are private sector companies and we’d be helping private-sector companies,” he said. “If you took that kind of view it might bring more urgency to the issue of swapping MBS for Treasuries.”