The Treasury wants all of the profits from the government-sponsored enterprises to go to the taxpayers.
Everyone applauds such a notion. It speaks to the goal of speeding up the payback of taxpayer dollars by Fannie Mae and Freddie Mac, which is a good thing.
It also indicates that the Treasury — although it seems contradictory — is admitting the GSEs will be in conservatorship for a very, very long time.
According to the buzz around Freddie Mac and Fannie Mae this morning, the announcement, which is made to sound like it is doing a lot, is actually changing very little.
The GSEs, sources say, are already focused on reducing the retained portfolio of mortgage guarantees. But it's more than $2 trillion at Fannie alone. That will take time to wind down, despite the Treasury's best intentions.
What the announcement doesn't do, it should be noted, is speak to the future of the GSEs and, more importantly, the future of mortgage finance in general.
Reading the Treasury announcement, it is no clearer which of the three options for redeeming the GSEs is supported at a federal level. The Treasury white paper is more than a year and a half old, after all. If the Treasury can quickly put out an announcement on expediting the payback to taxpayers, why can it not also say what will replace the GSEs as they wind down?
Which of the three options are going to be used?
Or are we expected to believe the entire mortgage finance system will contract proportionately to this reducing of Fannie and Freddie?
But, it is possible the benefits of today's announcement will extend in other areas. While it may not help the morale inside the GSEs, it may help the investor community at large, according to market strategist Jim Vogel at FTN Financial.
He points out that the current payment of a 10% fixed dividend is an example of the punitive nature of the initial conservatorship.
"It didn't match the goals of a long-term conservatorship where FNM/FRE remain the primary guarantee for the entire mortgage finance system," he said in an email to clients. "Reducing/removing doubt about the actual Treasury agreement — versus implied policy — should be a positive and reduce one big worry that has nagged at some investors for four years."