For the first three hours of the confirmation hearing of Steve Mnuchin, the Trump administration’s choice to lead the Department of the Treasury, nearly all of the housing-related discussion centered on the mortgage servicing and foreclosure practices of OneWest Bank, the bank that Mnuchin formerly chaired.
Despite Mnuchin making headlines shortly after the announcement of his nomination with discussions of removing Fannie Mae and Freddie Mac from government control, the only mention of Fannie and Freddie in those first few hours was from Sen. Johnny Isakson, R-Georgia, who asked Mnuchin about Fannie and Freddie’s role in the housing crisis.
But that changed when Sen. Mark Warner, D-Virginia, began questioning Mnuchin.
Warner, who pushed for housing finance reform in recent years with Sen. Bob Corker, R-Tenn, pointedly asked Mnuchin about how exactly the Trump administration planned to pursue Fannie and Freddie reform.
Mnuchin’s comments about removing Fannie and Freddie from conservatorship led some to question whether Mnuchin (and therefore the Trump administration) supported the “recap and release” of Fannie and Freddie, a plan in which Fannie and Freddie would be allowed to rebuild their dwindling capital buffers, followed by releasing them from their current state of conservatorship.
But asked by Warner if he does indeed support the recap and release of Fannie and Freddie, Mnuchin threw water on those who hope to see the Trump administration pursue recap and release.
“My comments were never that there should be recap and release,” Mnuchin said. “For long periods of time, Fannie and Freddie were well run and did not create risk to the government. I believe there are very important entities.”
That doesn’t mean that Fannie and Freddie should be left to their own devices, Mnuchin said.
But Mnuchin also said that the status quo of the housing finance system is unsustainable.
“We need housing reform,” Mnuchin said. “We shouldn’t leave Fannie and Freddie alone for the next four or eight years without reform.”
While Mnuchin did not provide specifics for how the Trump administration will seek housing finance reform, Mnuchin said he plans to do it with involvement from both parties.
“It is my objective to find a bipartisan solution to housing finance reform,” Mnuchin said.
Mnuchin was later asked to elaborate on his views on the future of Fannie and Freddie by Sen. Mike Crapo, R-Idaho, who himself is another proponent of housing finance reform.
“Do we need housing finance reform that goes further than recap and release?,” Crapo asked Mnuchin.
“I’m not a Medicare expert but on Fannie and Freddie, I think I am an expert,” Mnuchin said.
“Housing finance reform would be one of my priorities,” he continued. “We need a solution. “The status quo is not acceptable.”
Mnuchin said that he plans to seek a solution “where we don’t put the taxpayers at risk and we don’t eliminate capital for the housing market,” adding that he is “optimistic we can find a bipartisan solution.”