Connect with us

Politics

Fannie And Freddie Are Here To Stay According To Proposed Legislation

Published

on

(Via ZeroHedge)

Since the US government nationalized the two GSEs in 2008 in a $187 billion bailout of the mortgage giants, there have been consistent calls for them to be wound down and for the private sector to fill the void. As we discussed, this view is, or was, shared by new Fed Chairman, Jay Powell.

Mr. Powell has called on Congress to overhaul the housing finance system, saying he’d like to see the country’s two large mortgage-finance firms, Fannie Mae and Freddie Mac, move out from under government conservatorship. More private capital in those firms would reduce the risk of a taxpayer-funded bailout in the event of a downturn, he said in a speech in July. Although the Fed isn’t responsible for housing finance, it supervises some of the country’s largest lenders who frequently sell their loan to the two agencies. “No single housing finance institution should be too big to fail,” he said.

In August this year, Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), published the results of its latest annual stress tests on the two GSE’s. The FHFA outlined a “severely adverse” scenario in which US real GDP decline 6.5%, the unemployment rate rises to 10.0%, equity prices decline almost 50%, home prices decline 25% and commercial real estate prices by 35%. Under these conditions, it estimates Fannie and Freddie would need a bailout of up to $100 billion in the form of a draw on the Treasury (depending on how they treat assets to offset tax). Mortgages guaranteed by Fannie and Freddie amount to about $4 trillion and account for about 40% of the total US market.

Sadly, after almost a decade of federal ownership, the hope that Fannie and Freddie could be wound down has evaporated. Senators on both sides of the political divide have concluded that they are too big and too risky to replace. Proposed legislation in 2018 will see them retained at the centre of the US mortgage industry, rather than replacing them as a previous senate proposal tried and failed four years ago. According to the Wall Street Journal.

Lawmakers in both parties and the Trump administration are negotiating overhauls of the two companies—critical to home mortgages but in government conservatorship since the financial crisis—that could keep them at the center of the U.S. mortgage market for years to come, abandoning long-stalled proposals to wind them down, people familiar with the matter said.

Bipartisan Senate legislation set to be introduced in early 2018 marks the clearest sign of this reversal and shows how the companies, entering their 10th year under federal control, have proven too risky to attempt replacing. The housing market has seen strong demand in recent years, driven in part by steady access for many Americans to 4% or lower 30-year fixed-rate mortgages, thanks in part to a government backstop of the companies. Advancing legislation to refashion the nation’s $10 trillion mortgage market is a heavy political lift and may yet sputter during the coming midterm-election year, as a prior Senate effort did four years ago. One big difference this time around: a more incremental approach largely reliant on the existing housing-finance framework.

The new plan, proposed by Senators. Bob Corker (R., Tenn.) and Mark Warner (D., Va.) could be introduced as early as next month. Instead of a new mortgage-finance system, Fannie and Freddie will be retained under government control and permitted to issue mortgage securities guaranteed by the Treasury until private sector competitors emerge. The GSE’s investment portfolios, which have fallen to less than $250 billion each from over $900 billion each at their peak, could be liquidated under the Senate plan.

“We’re looking for a more simplified approach that protects the taxpayer, preserves the 30-year fixed mortgage and includes stronger access and affordability provisions,” Mr. Warner said in a statement Friday.

However, Bloomberg’s sources acknowledge that a private sector alternative to Fannie and Freddie will not only take years to emerge, but it’s not clear which companies will enter the market. Besides having the advantage of bi-partisanship, the proposals have the advantage that politicians who wish to reform mortgage finance are reaching retirement age as Bloomberg notes.

Another factor bolstering chances for a deal is the retirement of Washington officials interested in reducing government control of housing, including Mr. Corker. The Tennessee senator has been working with Mr. Warner and Senate Banking Committee Chairman Mike Crapo (R., Idaho) all year on the issue, according to people familiar with the deliberations, and Mr. Crapo has made the overhaul a top goal for his panel.

Even House Financial Services Committee Chairman Jeb Hensarling (R., Texas) signaled this month in a speech to Realtors that he would like to see a Fannie and Freddie deal in what is to be his final year in Congress. Mr. Hensarling said he is still committed to replacing the companies, but has backed off a position that any future setup provide no federal backstop.

Reforming mortgage finance has not been a focus for the Trump administration and nor has it endorsed any proposed legislation thus far. However, Treasury officials are reported to have been in close contact with the Senate officials as the plan has emerged. Furthermore, Treasury Secretary Steven Mnuchin, who also headed up Goldman’s mortgage securities department in the late 1990s, disagreed with calls for abolishing Fannie and Freddie last month.

“No, I wouldn’t,” he said in an interview at November’s Wall Street Journal CEO Council meeting. “We have got to make sure that the housing system is built to last.”

Bloomberg reports that supporters of Corker and Warner’s proposal see a “narrow window” in early 2018 when the legislation could be added on to another bill to reduce post-crisis regulations in the financial sector.

The question about what to do with Fannie and Freddie has now come full circle since the financial crisis. In its aftermath, the consensus view became so negative that even long-time supporters, like Democrat Barney Frank, capitulated, saying they should be abolished. In 2013, Obama called on Congress to wind them down and “end Fannie and Freddie as we know them”. However, the tide started to turn shortly after due to the lack of confidence in mortgage bonds that didn’t have a government guarantee. The latest Senate proposal is the first having bipartisan backing which keeps Fannie and Freddie instead of replacing them.

So, a bit like the “Too Big To Fail” banks, the encroachment of government into parts of the financial system which it should never have entered, makes winding back that intervention difficult, if not impossible. We could have seen it coming as Bloomberg laments.

Washington’s about-face will come as little surprise to market participants who for years predicted that efforts to replace Fannie and Freddie, which together back around half of all outstanding mortgages, would prove too difficult. But the shift on Capitol Hill nevertheless illustrates one way in which policy ideologues appear to have lost ground to market realities.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Politics

President Trump’s Rally Blitz Will Maintain Control in D.C.

Published

on

President Trump is proving once again that no one in American politics connects with the people the way he does. With days left before the November 3 midterms, he is on a relentless rally blitz—hitting Texas for Ken Paxton, Kansas for Roger Marshall, Ohio for Jon Husted, Florida for Byron Donalds and the full Republican ticket, Georgia, South Carolina, Iowa, Michigan and beyond—packing arenas and speaking directly to the working men and women who actually build, drive, farm, and keep this country running. The crowds are loud, the energy is real, and the message is simple: pretend Trump is on the ballot, because the stakes are exactly the same. This is not a defensive scramble. It is the most effective turnout machine in modern politics doing what it has always done—cutting through the noise and reminding Americans that their voice still decides who controls Washington.

The legacy media and the Democrat machine keep peddling the same tired blue-wave script, but they are ignoring what is happening on the ground because they have never understood the people Trump speaks to. These rallies are not scripted corporate events. They are town-square moments where a president who has spent years delivering on the border, energy independence, fair trade, and a direct $5,000 Trump Dividend for every adult citizen if Republicans hold both chambers stands in front of the voters the elites wrote off years ago. Trump does not need permission from consultants or focus groups. He knows the cost of living is personal, that secure borders protect communities, and that American workers come before foreign competitors and open-border ideology. That direct connection is why low-propensity voters show up when he asks. It is why Republican candidates in competitive and traditionally safe seats are seeing the boost that only a Trump visit delivers. The permanent class in D.C. and the corporate press cannot replicate it because they do not respect the people enough to try.

When Republicans keep the House and Senate on November 3, it will be because Trump spent the final stretch of the campaign doing what only he can: putting the America First agenda in front of the voters who care about it most and turning that energy into ballots. Control in D.C. means the border stays enforced, the investigations stay dead, the manufacturing and energy gains stay protected, and the Trump Dividend becomes a real check in the hands of American citizens instead of another promise the swamp kills. The alternative—a Democrat-led Congress—would immediately reopen the floodgates, restart the lawfare, and put globalist priorities back in charge of the people’s money and security. Trump’s blitz is the proof that the American people are still in the fight and still respond when a leader treats them like the sovereign owners of the country rather than a demographic to be managed. Early voting is underway. The rallies are filling up. The path is clear: show up the way Trump is showing up, and Republican majorities hold. That is power. That is populism that actually works. That is how control stays in the hands of the citizens who pay for it.

Continue Reading

Iowa

Zach Lahn & Chris Jones: Outsiders With Credentials That Can Finally Fix Iowa’s Water

Published

on

Iowa’s water problem is not a mystery. High nitrate loads from agricultural runoff have pushed drinking water utilities like Des Moines Water Works into record stretches of nitrate removal. The state’s cancer rates rank among the highest in the nation and continue rising. Streams that once supported fishing and recreation now carry the signature of the corn-soy-CAFO system. Politicians have promised action for years. Results have been scarce.

This cycle offers something different: two candidates whose combined credentials match the scale of the problem. Republican gubernatorial nominee Zach Lahn brings a farmer’s understanding of what works on the ground and the political will to fund it. Democrat Chris Jones, running for Secretary of Agriculture, brings decades of hands-on scientific expertise measuring, documenting, and explaining exactly what is happening in Iowa’s water. Together, even if Jones serves only a single term, they have the tools to produce measurable improvement where previous administrations produced only reports.

Zach Lahn’s Practical Path

Lahn is a sixth-generation Iowan who bought back his family’s Belle Plaine farmstead after it left family hands. He has made water quality and cancer rates central to his campaign, explicitly linking elevated nitrates to colorectal cancer and other health outcomes. His approach prioritizes proven practices that reduce nutrient loss without bankrupting family farms.

He has called for finally funding the Iowa Natural Resources and Outdoor Recreation Trust Fund—the IWILL program voters approved by a 63 percent margin in 2010 but that lawmakers left empty. Lahn wants that money directed first at the most impaired watersheds: the Des Moines and Raccoon rivers and their tributaries. He points to saturated buffers, which Iowa State University research has shown can remove essentially all nitrate from tile drainage in tested settings. He favors incentives structured so farmers make money adopting deeper nitrogen application and other conservation measures rather than merely break even. Upstream and downstream monitoring would measure results. The goal is targeted progress that keeps land in Iowa hands instead of accelerating consolidation through heavy regulation.

Lahn’s record is that of a farmer and businessman focused on implementation. He has argued that the status quo—talking about water while avoiding hard choices on funding and incentives—has failed. His plan is not radical. It is the first serious attempt by a Republican nominee to treat the problem as both an environmental and public-health priority that can be addressed while supporting working farms.

Chris Jones’s Unmatched Expertise

Jones arrives with credentials no other statewide candidate possesses. He holds a Ph.D. in analytical chemistry. For eight years he managed the water quality testing laboratory at Des Moines Water Works, overseeing operations at one of the world’s largest nitrate-removal facilities built specifically for agricultural runoff. He then spent four years as an environmental scientist with the Iowa Soybean Association, helping deploy some of the state’s earliest independent monitoring systems. At the University of Iowa he worked as a research engineer and helped create the first real-time public sensor network tracking nitrate and other pollutants across Iowa’s rivers—the system that later faced funding cuts.

His 2023 book, The Swine Republic, was selected by the Library of Congress as Iowa’s representative at the National Book Festival. He co-founded Driftless Water Defenders to protect northeast Iowa’s waters. For decades Jones has measured the loads, traced the sources, and explained in plain language why the current production system produces the outcomes Iowans see in their faucets and in the Gulf dead zone. He knows the data because he generated much of it.

That body of work is the difference between someone who tours a treatment plant and says he is “listening and learning” and someone who has spent a career inside the problem.

The Combination That Can Deliver

Lahn as governor would set the priority, secure the funding through IWILL and other mechanisms, and structure incentives that farmers can actually accept. Jones as agriculture secretary would bring the institutional knowledge to design the interventions, expand and protect monitoring, and ensure resources go where the data show the biggest return. The two roles are complementary. The governor controls the budget and the bully pulpit. The agriculture secretary oversees conservation programs, technical assistance, and much of the interface with producers. One term of Jones in that office, paired with a Lahn administration that treats water as a top-tier issue, could establish the monitoring baselines, the practice adoption targets, and the accountability mechanisms that have been missing for a generation.

Critics will note the party difference. Lahn has emphasized voluntary incentives and avoided broad mandates that risk farm bankruptcies. Jones has been more direct about the need for systemic changes in the corn-soy-ethanol model. On the narrow but decisive question of cleaning Iowa’s water, however, their credentials align more closely than those of any other pairing on the ballot. Expertise plus political will is a rare combination. Iowa has the first and can elect the second.

The Credentials Gap with Rob Sand

Democratic gubernatorial nominee Rob Sand has released a water plan that includes more monitoring funding, a dirty-water notification system, expanded wetlands, and tax credits for conservation practices. Those are reasonable ideas. What Sand does not have is any professional background in water science, laboratory management, sensor networks, or published research on Iowa’s nutrient problem. His education is a political science degree and a law degree. His career is prosecution and state auditing. He has described his own process as still listening and learning by visiting treatment facilities.

That is not a criticism of Sand’s intentions. It is a statement of fact about the difference between a generalist politician and a specialist who has managed the largest nitrate-removal operation in the region, built the state’s real-time monitoring capacity, and written the most detailed public account of how Iowa’s agriculture produces its water outcomes. When the problem is technical, decades in the making, and tightly linked to the dominant industry, credentials matter. Sand has none of the specialized ones Jones has spent a career accumulating.

Iowans have heard promises before. This year they have a chance to elect a governor who has made water a defining issue and an agriculture secretary whose life’s work is the subject. Zach Lahn and Chris Jones, working from their respective offices, offer the most credible path yet to measurable improvement—even if Jones’s tenure is limited to a single term. The alternative is more of the same: plans without the people who actually know how to execute them.

Continue Reading

Iowa

Rob Sand Scrambles as Handlers ‘LGI Chemical Co.’ Are Exposed

Published

on

Iowa’s open gubernatorial race has exposed a stark difference in substance and accountability. Democratic nominee and current State Auditor Rob Sand has spent the campaign leaning on accessible, low-complexity appeals—temporary gas tax relief, ending the privatized Medicaid system, raising the minimum wage to $12, and legalizing recreational marijuana regulated like alcohol. His cannabis plan, released on 4/20, focuses on capturing tax revenue currently flowing to neighboring states and treating the substance like beer. He also positions himself as an anti-partisan reformer calling for term limits, age limits, cognitive tests, and vetoes of “culture war bills.” These messages are easy to sell, but they avoid Iowa’s most entrenched problems.

Republican nominee Zach Lahn has taken a different approach, centering measurable goals on the issues that actually shape daily life in the state: the nation’s fastest-rising cancer rates, water quality tied to agricultural runoff and nitrates, the loss of roughly 10,000 family farms over two decades, and the steady outmigration of young Iowans. His proposals include funding the voter-approved IWILL program, offering refundable tax credits so farmers can adopt saturated buffers and regenerative practices without losing money, expanding water monitoring, pursuing antitrust action against major ag input companies, and creating an income-tax exemption for high-school graduates who stay or return, with the money directed toward a first-home down payment. He has also called for banning hedge funds from single-family homes, ending incentives for out-of-state corporations, restricting benefits for illegal immigrants, and abolishing Flock surveillance cameras. These are specific mechanisms, not slogans.

The contrast has sharpened as Lahn has directly exposed the funding and environmental record behind Sand’s campaign. Sand’s wife, Christine Lauridsen Sand, is CEO of The Lauridsen Group (LGI), a privately held Iowa holding company. Members of the Lauridsen family have contributed a combined $13.1 million to Sand’s campaigns since 2018—the largest amount from any single family source in recent Iowa history. One LGI subsidiary, Boyer Valley, markets high-nitrogen organic fertilizer products derived from poultry byproducts, including feather meal and blood meal. Another, Essentia Protein Solutions, has a documented history of Iowa Department of Natural Resources violations involving wastewater discharges, elevated ammonia, E. coli, lagoon overflows, and impacts on streams such as the West Fork Camp Creek. Lahn’s ads and debate exchanges have highlighted the donations alongside these records and asked what influence the funding carries on water-quality policy. Sand has pushed back, stating that the family business does not sell chemical nitrate fertilizer and that certain pollution claims were cleared, but the public record of contributions, DNR citations, and product marketing has forced him into repeated defensive explanations. The exposure has undercut Sand’s image as an independent reformer focused on clean water and has left him scrambling to reframe the story while Lahn continues pressing the issue on the trail and in debates.

Public polling currently shows Sand ahead, though some recent surveys have tightened (Emerson’s early-October numbers put it at a 4-point margin). That lead should be viewed with heavy skepticism. Iowa has long ranked among the hardest states in the country to poll accurately, a point analysts at FiveThirtyEight and others have made for years due to its rural electorate, high share of independents and non-party voters, low response rates, and the difficulty of reaching certain Republican-leaning demographics. The pattern of error has been consistent across recent cycles: polls systematically underestimated Donald Trump’s support in Iowa in 2016, 2020, and especially 2024, when the highly regarded Des Moines Register/Selzer poll had Kamala Harris ahead by 3 points only for Trump to win the state by roughly 13—a 16-point miss. Similar underestimation of Republican strength has appeared in past Iowa governor and statewide races. Non-response bias among rural and working-class voters who distrust media and polling operations has repeatedly produced results that look more favorable to Democrats until Election Day. If that same dynamic is repeating now, Sand’s current lead is inflated, and Lahn’s focus on water quality, cancer rates, family farms, and keeping young Iowans in the state is connecting with the voters who have been hardest for pollsters to reach.

Continue Reading

Trending

Donate to Populist Wire

*Note: Every donation is greatly appreciated, regardless of the amount.