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Published: Fri, December 02, 2016
Economy | By Melissa Porter

Treasury pick Mnuchin pushes GSE privatization

Treasury pick Mnuchin pushes GSE privatization

President-elect Donald Trump's pick for treasury secretary, Steven Mnuchin, announced Wednesday that he wants Fannie May and Freddie Mac, two of the largest names in the USA mortgage market, out of the hands of the federal government.

Trump's decision to pick Steven Mnuchin, a former Goldman Sachs partner, as the next Treasury Secretary is driving hopes on Wall Street that government sponsored mortgage giants Fannie Mae and Freddie Mac will be privatized in the new administration. The government wound up investing $187 billion to bail the two of them out. Including those dividends, Fannie and Freddie will have paid $255.8 billion to Treasury since the government took them over.

Investors have taken his comments to mean that the Treasury will no longer collect money from Fannie and Freddie, and that has the investment community excited. "Let me just be clear, we will make sure that when they are restructured they are absolutely safe", Mnuchin said Wednesday.

Mnuchin also said the GSEs "were not exactly role models" and were "displacing private lending" in the mortgage markets.

Seiberg notes Mnuchin "knows" investors who are suing the government over the profit sweep, and understands the debates "subtleties" better than most.

Both ran into trouble after the housing bubble burst as more and more borrowers defaulted on their mortgages.

Fannie Mae and Freddie Mac have been under government control since the 2008 financial crisis. Fannie Mae (OTCQB: FNMA) was up 1.16 to $4.24 per share.

The borrowing cost on 30-year mortgages, the most widely held type of USA home loan, averaged 4.08 percent in the week ended December 1, which was the highest since 4.09 percent in the week of July 16, 2015.

That stance could bring him in conflict with Republican lawmakers. Meanwhile, Republican Sen. Robert Corker of Tennessee co-sponsored a bill to get rid of Fannie and Freddie altogether.

Lawmakers have been hesitant to release Fannie Mae and Freddie Mac from government control without a broader reform to housing policy.

The market for in-game items is estimated to reach a value of more than $46 billion next year and is expected to grow by an compound annual rate of more than 6 percent, according to research firm Super Data Research. But no stocks have moved more than Fannie and Freddie on the Mnuchin pick.

"At the moment there are few opportunities for players to legally trade game items", Deutsche Boerse said in a statement.

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