CoronavirusPolitics & MoneyRegulatory

Calabria delays GSE capital rules citing COVID-19 crisis

Measures to limit virus spread will complicate the feedback process, he says

Federal Housing Finance Agency Director Mark Calabria said on Wednesday the COVID-19 pandemic will cause him to postpone the release of the capital proposal for Fannie Mae and Freddie Mac until the second half of May.

Calabria spoke on a conference call to the Exchequer Club of Washington D.C. today after his luncheon with the group was canceled because of the spread of the virus. About 7,700 Americans have tested positive for the coronavirus, and more than 100 have died from COVID-19, the disease it causes, according to Johns Hopkins University.

The public health crisis caused by the spread of COVID-19 will complicate the notice and comment process for advancing the capital proposal for the government-sponsored enterprises, or GSEs, Calabria said.

“We are delaying the opening of the comment period until we have some certainty on what the current overall situation is,” said Calabria, referring to the virus and measures taken to stop its spread. “We’re going to be cognizant of the fact that it may be very difficult for people to weigh in.”

The delay doesn’t mean the “recap and release” of Fannie Mae and Freddie Mac has been knocked off track, said Jaret Seiberg, managing director of Cowen Group in Washington D.C.

“We believe this still leaves enough time to contractually set Fannie and Freddie on a path out of conservatorship, though it leaves little ability to absorb further delays,” Seiberg said. “If not done before inauguration, election risk becomes a bigger factor.”

By election risk, Seiberg means: If Donald Trump doesn’t win the next presidential election, the administration’s plan to end the conservatorship of the GSEs could fail.

“Further delays will push some decisions beyond the inauguration,” Seiberg said. “FHFA might not have the time to contractually lock the release from conservatorship in place before a new administration takes power.”

The coronavirus has added a new twist to the presidential election, Seiberg said.

“The election might well become a referendum on how the president handled the COVID-19 crisis,” he said. “This doesn’t mean Trump won’t win. It is more that his victory or defeat is likely to be determined by what happens in the next four months rather than by what happened over the last three years.”

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