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Conservatorship – Part 3
GSEs – Government Sponsored Enterprises – Fannie and Freddie Still in Conservatorship
In September 2008, both Fannie Mae (FNMA) and Freddie Mac (FHLMC) faced severe financial distress due to the collapse of the housing market and the broader financial crisis. To prevent the potential collapse of these government-sponsored enterprises (GSEs), the Federal Housing Finance Agency (FHFA) placed them under conservatorship, where they remain to this day.
Under conservatorship, the FHFA assumed control over Fannie Mae and Freddie Mac, and their operations were effectively taken over by the government. The U.S. Department of the Treasury provided financial support to stabilize the two entities. The government’s financial support took the form of preferred stock investments and commitments to ensure the entities’ solvency.
The conservatorship was intended to be a temporary measure to stabilize the housing market and prevent further disruptions to the financial system.
Efforts to reform and address the future of these entities have been ongoing, with discussions about their roles in the mortgage market and the possibility of transitioning them out of conservatorship. There have been proposals and discussions about reforming the housing finance system, potentially privatizing or restructuring Fannie Mae and Freddie Mac. The ultimate resolution and liability for any outstanding debts or obligations will depend on future legislative and policy decisions.