Barclays and Annaly Launch New Research Study, Government-Sponsored Enterprise (GSE) Reform: Unfinished Business
June 26 2019 - 09:01AM
Business Wire
Joint-study discusses steps that the US Administration, as well
as Congress, could take when addressing GSE reform
Barclays, in partnership with Annaly Capital Management, Inc.
(NYSE: NLY) (Annaly), today released a new joint-study, entitled
GSE Reform: Unfinished Business, which lays out steps that
policymakers might take to reform the Federal National Mortgage
Association (Fannie Mae) and the Federal Home Loan Mortgage
Corporation (Freddie Mac). The study is co-authored by Ajay
Rajadhyaksha, Head of Macro Research at Barclays, V.S. Srinivasan,
Managing Director in Annaly’s Agency and Residential Credit Group,
and Andreas Strzodka, Director of Macro Strategy at Annaly.
The authors evaluate the significant evolution of the housing
finance market in recent years, including the development of the
Credit Risk Transfer (CRT) market. In the commentary, the authors
suggest that most policymakers, on either side of the political
aisle, seem to agree on three goals related to GSE reform: 1)
protecting the US taxpayer; 2) attracting private capital; and 3)
creating a more competitive landscape. The first two goals are two
sides of the same coin and the study considers steps that the
Administration could take unilaterally to achieve them, while the
third goal would require the intervention of Congress.
“GSE reform is difficult to pull off successfully,” says Ajay
Rajadhyaksha, Head of Macro Research at Barclays. “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. This study examines a possible way
forward.”
“This piece reinforces Annaly’s continued focus on providing
market insight on the future of the US mortgage market. As GSE
reform continues to take shape, we believe that dedicated private
capital creates competition and is an integral part of reform,”
said V.S. Srinivasan, Managing Director in Annaly’s Agency and
Residential Credit Group. “We want to maintain a healthy housing
market throughout any reform, and therefore a smooth transition
will be critical.”
The key takeaways of the report include:
- A revolving CRT structure could enable the GSEs to shed credit
risk on most future production, thereby avoiding execution risk
while protecting the taxpayer.
- To attract private capital, the GSEs could shrink their
footprint in areas that are not part of their core mandate, such as
second homes, investor and jumbo mortgages.
- If the goal of GSE reform is to foster competition and
materially decrease “too big to fail” risk, Congress would have to
pass legislation that replaces the GSE duopoly with multiple
smaller guarantors.
- Critically, GSE reform legislation must provide a smooth
transition path from the current system to an alternative world
with more private capital and less governmental involvement.
For more information or to view the full report, please click
here.
About Barclays
Barclays is a transatlantic consumer and wholesale bank offering
products and services across personal, corporate and investment
banking, credit cards and wealth management, with a strong presence
in our two home markets of the UK and the US.
With over 325 years of history and expertise in banking,
Barclays operates in over 40 countries and employs approximately
83,500 people. Barclays moves, lends, invests and protects money
for customers and clients worldwide.
For further information about Barclays, please visit our website
www.barclays.com
About Annaly
Annaly is a leading diversified capital manager that invests in
and finances residential and commercial assets. Annaly’s principal
business objective is to generate net income for distribution to
its stockholders and to preserve capital through prudent selection
of investments and continuous management of its portfolio. Annaly
has elected to be taxed as a real estate investment trust, or REIT,
for federal income tax purposes. Annaly is externally managed by
Annaly Management Company LLC. Additional information on the
company can be found at www.annaly.com.
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Barclays Brittany Berliner +1 212 526 4894
brittany.berliner@barclays.com
Annaly Capital Management, Inc. Investor Relations
1-888-8Annaly investor@annaly.com
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