President Donald Trump's pick for treasury secretary wants to end the government conservatorship of Fannie Mae and Freddie Mac, but he is not set on how to do so.
In written statements submitted to the Senate Banking Committee this week, Scott Bessent, a hedge fund manager and close Trump advisor, said the mortgage market makers should be recapitalized and released. But, he noted, the process should not be rushed.
"I look forward to working on the current status of the conservatorship of Fannie Mae and Freddie Mac," Bessent wrote. "The conservatorships have persisted for more than 15 years, and no conservatorship should be indefinite. However, any actions pursued should be carefully designed and executed."
The response came to one of several questions for the record submitted by Sens. Elizabeth Warren, D-Mass., and Raphael Warnock, D-Ga., about the government-sponsored enterprises.
Bessent did not commit to any specific
He declined to forecast how long it might take or what kind of proceeds an end to conservatorship might mean for the government and private shareholders for the companies.
"I look forward to being briefed by treasury staff and all interested parties … and if confirmed, I will commit to carefully assessing and instituting a process if it is deemed appropriate," he wrote.
Bessent said structural changes to the GSEs, including an explicit guarantee for them from the federal government or regulating their rates of return to investors, would need to go through Congress. Likewise, he pledged to work with lawmakers on other changes needed to facilitate the end to conservatorship.
"If any legislative changes are warranted, I commit to working collaboratively with Congress in this process," he wrote.
Bessent said the process should be conducted in a manner that protects the availability of mortgage credit throughout the country and improves
Likewise, he said he would need to discuss the matter with the new head of the FHFA to get better sense of potential "downstream" effects from releasing Fannie and Freddie from conservatorship, including how the move might affect their credit scores — something that could have implications for mortgage-backed securities and, ultimately, rates paid by borrowers.
Trump attempted to end the conservatorship during his first term in office and though he has said little about it since his electoral victory last fall, those close to him say
During the first Trump administration, the GSEs began retaining earnings — rather than turning them over to the government — to build up capital. Those efforts have put them in a better position to stand on their own, but a full release from conservatorship is expected to take years to complete.
