> One possibility here is for the government to cancel its entire $348.4 billion senior preferred claim for the benefit of existing common and preferred shareholders. That is obviously what those shareholders want
It seems the only reason the government should give up ~$28B in revenue PER YEAR for literally nothing is to put the government in more debt and give free money to Bill Ackman.
bko · 8h ago
I don't think its a good idea but I think it's in the long run interest of the government/taxpayer to divest out of Fannie/Freddie. The current situation makes that impossible, so they'll have to take some kind of haircut. As the article discusses, one of the options is to screw over current investments (Ackman) and raise an IPO, although it would be impossible to raise enough to buy the government out at its current stake.
Of course the big caveat is that once private, the government needs to ensure another bailout is not possible.
onlyrealcuzzo · 8h ago
> As the article discusses, one of the options is to screw over current investments (Ackman) and raise an IPO
Ackman is not getting screwed.
When the government essentially nationalized Fannie and Freddy, they made it clear that the stock in those companies was worthless.
Ackman bought it, thinking his billions would be enough to lobby the government into zeroing out their share and handing him $600B.
He's not getting screwed if they say, "you bought worthless stock, and it's still worthless, sorry."
margalabargala · 5h ago
> He's not getting screwed if they say, "you bought worthless stock, and it's still worthless, sorry."
Sure he is. He's just doing it to himself.
TuringNYC · 6h ago
They can divest out of Fannie/Freddie but we'll still have the liability, just as a shadow liability. Fannie/Freddie are Too Big to Fail, so the next time things get bad, we'lljust need to step back in.
bormaj · 4h ago
What's the net benefit to the taxpayer/government for divesting from Fannie/Freddie?
floren · 9h ago
Yeah it would be pretty fucked up if the current administration pushed something that's bad for the US government but very good for some billionaires.
I assume the only reason it hasn't happened yet is that Trump is still figuring out how to tank Fannie/Freddie shares beforehand so he and his cronies can buy them up like they did with the on-again off-again tariff threats.
dsr_ · 7h ago
The obvious play is for a staffer to invite Bill Ackman to play golf at a Trump course and explain that a big investment in whatever bribery scheme Trump has going now would make it easier to sell Fannie and Freddie.
bko · 8h ago
As the article discusses, the government owns virtually every dollar of profit Fannie/Freddie. I don't see how tanking the private shares (worthless in the current state) would benefit Trump or his cronies. Those shares are already owned by billionaires, I guess new ones can buy them?
jgalt212 · 9h ago
> Yeah it would be pretty fucked up if the current administration pushed something that's bad for the US government but very good for some billionaires.
It's both parties--and it's been this way since the end of the cold war. There's no longer a need to say we're better than the alternative. The dems cancelled student debt--a gift to both debtors in the investor class. Harris's campaign trail housing push was also a gift to the investor class. And the Fed printed $9T while dems were in office.
shigawire · 8h ago
In your example student loan relief also has a tangible benefit to indebted people. Affordable housing initiatives benefit people who need housing.
jgalt212 · 8h ago
My point was everything the dems do to help out the poor also has the side effect of helping out the investor class. They say they help out the poor, and they do, but they also keep the plutocrats plutocratic.
roxolotl · 8h ago
What would helping the poor without helping investors at all look like to you?
jgalt212 · 8h ago
Loosening up zoning laws to allow for much greater supply of housing. Blue states don't do this because it would be bad for the investor class who's owns real estate.
williamcotton · 8h ago
In states where there are looser zoning laws and more housing is built, who invests in and profits more from the new construction, the investor class or the poor?
onlyrealcuzzo · 7h ago
Who un-benefits more from there not being enough housing? The rich or the homeless?
jgalt212 · 5h ago
In such scenarios, there are no excess returns from home construction. Homebuyers benefit from abundant supply.
amanaplanacanal · 6h ago
Some blue states have done this, including California, Oregon, Connecticut, and Maine. I expect more will follow.
It will be pretty bad for young folks in general if Fannie and Freddie are released from conservatorship.
If anything, they should be dissolved entirely.
Releasing them will create a privatized monopoly and further inflate housing prices. This would be really great news for several dozen ultra wealthy folks, moderately good news for existing home owners, and bad for anyone else.
TuringNYC · 6h ago
>> Releasing them will create a privatized monopoly and further inflate housing prices.
Low rates do not lower home prices-- they just let people borrow more and inflate home prices. One possibility is that artificially low rates rise to market rates...and home prices fall commensurately, or rise less to accomodate.
phkahler · 8h ago
All that talk of putting home equity into bitcoin...
The big players have been trying everything to unload bitcoin onto the public - floating the idea of government having a "strategic bitcoin reserve" and other nonsense. Now this?
On a related note, the US housing market is overdue for price collapse part II. I'm very interested to understand what's holding them up so high - increasing even as interest rates rise. How? Is it just all that Covid money still sloshing around the economy?
shigawire · 8h ago
In my locality it is a lack of supply
StanislavPetrov · 4h ago
>I'm very interested to understand what's holding them up so high - increasing even as interest rates rise.
Mostly lack of liquidity. Unless forced, very few people who are sitting on a 2% mortgage are going to sell and take on another mortgage at 8%. Supply has gone up a little since the Covid lows but it still nowhere near where it was during the last collapse in 2007/2008 when sellers were legion.
Looking at the graphs of US home prices to buyer income, it would seem something has to give (the value of homes or the value of the dollar). With how leveraged Fannie and Freddie are, the value of their assets would fall considerably if there is a significant disruption in the real estate market.
onlyrealcuzzo · 8h ago
The government insures against home price decreases.
It has zero interest in homes going down in value (not only from a voting perspective, but also from a financial perspective).
The thing that's going to give (long term) is not going to be nominal home prices.
Real home prices declines are plausible.
mrinterweb · 8h ago
Anyone who's invested in real estate doesn't want home prices to go down, but it seems a necessity considering how affordability has been decreasing. I would think a buyer market can only sustain so much. If a recession is caused by tariffs, AI taking jobs, war, etc; the real estate market seems to be in a precarious enough position to be affected.
jaxtracks · 7h ago
Well, inflation can always solve affordability if prices stagnate. This is what made the 90s a great time to buy, right? We're pretty far behind the ball though, I think it'd be like 20 years for us to get back to that level of affordability at current nominal interest rates.
onlyrealcuzzo · 7h ago
> the real estate market seems to be in a precarious enough position to be affected.
In real terms, yes.
In nominal terms, no.
The dollar will get tanked, so that asset prices fall much less than they otherwise would.
ethagknight · 7h ago
Isnt the obvious answer for the Fed to start dropping interest rates somewhere in between the 0 and current level? eases a lot of pressure on the underlying assets and allows for markets to start moving again. Even if it's a short reprieve from current rates, a window to repackage and move assets would buy everyone time and start to bleed off some underperforming notes (or maybe just the marginal ones, still reducing drag).
Or maybe this is a different issue that im not quite grasping.
sidewndr46 · 7h ago
This seems to be the quintessential comment along the lines of how we can kick a time bomb down the road a bit.
y-curious · 7h ago
>kick a time bomb down the road
Add it to the list that includes social security funding, population decline, poor infrastructure, attitudes towards vaccines and the national debt. It's just how we roll
It seems the only reason the government should give up ~$28B in revenue PER YEAR for literally nothing is to put the government in more debt and give free money to Bill Ackman.
Of course the big caveat is that once private, the government needs to ensure another bailout is not possible.
Ackman is not getting screwed.
When the government essentially nationalized Fannie and Freddy, they made it clear that the stock in those companies was worthless.
Ackman bought it, thinking his billions would be enough to lobby the government into zeroing out their share and handing him $600B.
He's not getting screwed if they say, "you bought worthless stock, and it's still worthless, sorry."
Sure he is. He's just doing it to himself.
I assume the only reason it hasn't happened yet is that Trump is still figuring out how to tank Fannie/Freddie shares beforehand so he and his cronies can buy them up like they did with the on-again off-again tariff threats.
It's both parties--and it's been this way since the end of the cold war. There's no longer a need to say we're better than the alternative. The dems cancelled student debt--a gift to both debtors in the investor class. Harris's campaign trail housing push was also a gift to the investor class. And the Fed printed $9T while dems were in office.
If anything, they should be dissolved entirely.
Releasing them will create a privatized monopoly and further inflate housing prices. This would be really great news for several dozen ultra wealthy folks, moderately good news for existing home owners, and bad for anyone else.
Low rates do not lower home prices-- they just let people borrow more and inflate home prices. One possibility is that artificially low rates rise to market rates...and home prices fall commensurately, or rise less to accomodate.
The big players have been trying everything to unload bitcoin onto the public - floating the idea of government having a "strategic bitcoin reserve" and other nonsense. Now this?
On a related note, the US housing market is overdue for price collapse part II. I'm very interested to understand what's holding them up so high - increasing even as interest rates rise. How? Is it just all that Covid money still sloshing around the economy?
Mostly lack of liquidity. Unless forced, very few people who are sitting on a 2% mortgage are going to sell and take on another mortgage at 8%. Supply has gone up a little since the Covid lows but it still nowhere near where it was during the last collapse in 2007/2008 when sellers were legion.
https://en.macromicro.me/charts/32/existing-home
It has zero interest in homes going down in value (not only from a voting perspective, but also from a financial perspective).
The thing that's going to give (long term) is not going to be nominal home prices.
Real home prices declines are plausible.
In real terms, yes.
In nominal terms, no.
The dollar will get tanked, so that asset prices fall much less than they otherwise would.
Or maybe this is a different issue that im not quite grasping.
Add it to the list that includes social security funding, population decline, poor infrastructure, attitudes towards vaccines and the national debt. It's just how we roll