Those actions would be taken administratively. In this report, the Congressional Budget Office examines options for recapitalizing the GSEs by allowing them to retain all of their profits for an initial period, after which they would sell new common stock to investors to replace the Treasury’s ownership stake. The Treasury also recommended administrative actions aimed at returning the GSEs to private ownership-including recapitalization and an end to their conservatorships-and called for legislative action to resolve the GSEs’ status. In late 2019, the Treasury allowed the GSEs to retain more of their earnings to rebuild their capital reserves. They have also paid most of their earnings to the Treasury, which owns dominant stakes in the two GSEs. Since then, Fannie Mae and Freddie Mac have relied on federal support to remain financially solvent. In September 2008, their regulator, the Federal Housing Finance Agency, used its authority to take over management of the GSEs’ assets and business, a concept known as conservatorship. Scenarios for Recapitalization With a Common-Stock Offering at the Beginning of 2025įannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that play a central role in the U.S. Scenarios for Recapitalization With a Common-Stock Offering at the Beginning of 2023 Values CBO Used in Modeling Scenarios for Recapitalization Effects on Other Government Institutions.Effects on the Primary and Secondary Mortgage Markets.Potential Status of the GSEs as Systemically Significant Institutions.Other Considerations in Recapitalizing the GSEs.Treatment of the GSEs as Government Entities.Treatment of Changes to the Treasury’s Senior Preferred Shares and Warrants.Potential Budgetary Treatment of Recapitalization.Results for Recapitalization With a Common-Stock Offering in 2025.
Results for Recapitalization With a Common-Stock Offering in 2023.Redemption of Shareholders’ Claims in CBO’s Model.CBO’s Modeling of the Recapitalization Options.Disposition of the Treasury’s Stake in the GSEs.Potential Administrative or Legislative Actions.Regulatory Structure and Value of the GSEs’ Business After Recapitalization.Key Factors That CBO Incorporated in Its Analysis of the Options.Illustrative Options for Recapitalizing the GSEs Administratively.Evolution of the GSEs’ Operations in Conservatorship.CBO’s Analysis of Options to Recapitalize the GSEs.Challenges in Determining the Budgetary Treatment of Changes to the GSEs.The Treasury’s 2019 Proposals for Fannie Mae and Freddie Mac.
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