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Privatization plan
The Trump administration has announced a plan to return Fannie Mae and Freddie Mac to the private sector, "a development that would allow businesses to remain at the center of the housing market for decades," according to the Wall Street Journal. The proposal "represents a major shift from what the leaders of both parties had promised over the past decade – to abolish corporations, which guarantee about half of the US mortgage market. This approach, which does not require congressional approval, would be a significant gain for investors who have bet that politicians will not keep their promises. "
Bloomberg News
The plan means that "the US mortgage financing system will not fundamentally change in the near future," the document adds. "This is the inescapable starting point for the Housing Reform Plan released by the Treasury Department, although it has been disappointing for many parties. Fannie Mae and Freddie Mac, "who have been under the tutelage of the state for eleven years, are likely to stay for a while."
According to the New York Times, some of the 49 recommendations of the administration in the proposal require the Congress to act, it is noted that these proposals "are not likely to elicit an enthusiastic audience in Congress, which is deeply divided on the question and is now absorbed by other fights in the run-up to the 2020 elections, "says The New York Times.
Under this plan, Fannie and Freddie "would be converted back into private businesses, but would be required to pay taxpayers a fee for government protection. It would also open the market to competitors for the first time, "reports the Washington Post.
The plan clearly states that "the Treasury's ultimate preference is for Congress to adopt government-sponsored enterprise reform," said American Banker. "This legislation would include an explicit government guarantee and a new support provided by Ginnie Mae for the guarantors competing with Fannie Mae and Freddie Mac."
Treasury Secretary Steven Mnuchin said the plan "would not jeopardize the 30-year fixed-rate mortgage," reports the Financial Times. The plan would allow Fannie and Freddie "to keep a larger share of their profits, rather than return as much to the government as they had to do under their bailout," the paper said. "A recapitalization in this way could make their shares more attractive to investors in privatization."
the Wall Street newspaper
Slow marches
The Federal Reserve "is preparing to reduce interest rates to [its] next political meeting in two weeks, probably a quarter of a point, as the trade war between the United States and China darkens the global economic outlook. The idea of an aggressive half-point reduction to combat the slowdown has not attracted much support from the central bank. "
Prudent case
Prudential Financial agreed to shell out $ 2.35 billion to buy Insurance IQ, an online start-up "while traditional life insurers are looking to reach digital-savvy customers who buy online." Prudential believes that insurance can "help solve a decades-old problem of the biggest names in life insurance: selling to middle-class customers. This transaction fits into a trend that combines traditional life insurers with what insuretech companies call to reach new audiences and benefit from algorithm-based data analysis. "
To note
"Our view is that the government's footprint has become too big. There are people in Washington who are happy to leave it like this for 10 or 20 years, and it's not us. We feel obliged to try to solve this problem. – Treasury Secretary Steven Mnuchin announced the Trump government's plan to send Fannie Mae and Freddie Mac back to the private sector
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