Annaly Co-Authors GSE Reform Study with Barclays
V.S. Srinivasan and Andreas Strzodka, of Annaly Capital Management, and Ajay Rajadhyaksha, of Barclays, discuss steps that the US Administration, as well as Congress, could take when addressing GSE reform. The world has changed in the decade since the US mortgage market sparked a global financial crisis. Banks have recapitalized, home prices have recovered, existing home sales are back to healthy levels, and the US economy is enjoying its tenth uninterrupted year of expansion. But in one important area of the US financial system, reform remains unfinished. The authors refer to the Government Sponsored Enterprises (GSEs), their conservatorship status, and their outsized roles in US housing finance.
Successive Administrations have rightfully lamented this ‘unfinished business’. Even after ten years, Fannie Mae and Freddie Mac are still wards of the US government. There is a reason for this inertia. GSE reform is difficult to pull off successfully. Do it right and you reduce the US homebuyer’s dependence on the GSE duopoly, manage to get private capital back in, and protect the US taxpayer against a repeat of 2008. Do it wrong, and you risk up-ending the world’s largest housing market.