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Steven Mnuchin begins reforming America’s giant mortgage-guarantee firms

“THE LAST unfinished business of the financial crisis”: that is the rallying cry of those seeking to reform Fannie Mae and Freddie Mac, the two giant government-sponsored enterprises (GSEs) that back much of America’s mortgage industry. In 2008, amid the wreckage of the housing market, they were bailed out by the federal government to the tune of $188bn and placed in “conservatorship”, a form of government control. On September 5th Steven Mnuchin, the treasury secretary, published a long-awaited plan to reprivatise them. “We want to make sure they are not in conservatorship on a permanent basis,” he told the Senate on September 10th.Mr Mnuchin set out two alternatives. The first, more sweeping, would need congressional approval. The second could be carried out by the Treasury and the Federal Housing Finance Agency (FHFA). Mr Mnuchin says passing reform through Congress is his preferred option. A senior Treasury official says administrative actions will start promptly, in part to lay the groundwork for legislation. But the administration will proceed whether or not Congress acts. The Trump administration is presenting America’s housing-finance industry with a “fork in the road”, says Jim Parrott of the Urban Institute, a think-tank.
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