Key Takeaways
- • BlackRock publicly opposed a hedge-fund-backed "recap and release" proposal to privatize Fannie Mae and Freddie Mac, calling it "fraught with ambiguities" in a white paper released on Friday.
- • BlackRock warned that recap and release "would likely be disruptive to the market and would fail to provide an explicit government guarantee."
- • The proposal, backed by hedge fund managers including Bill Ackman, Bruce Berkowitz, Richard Perry and John Paulson, would have the Treasury quickly sell its stake in the two government-sponsored enterprises.
- • BlackRock questioned whether the entities would become "too big to fail," potentially subjecting them to Federal Reserve scrutiny.
Summary
BlackRock, the world's largest asset manager, came out against a hedge-fund-backed proposal that would have the U.S. Treasury quickly sell its stake next year in Fannie Mae and Freddie Mac, according to the New York Post. The two government-sponsored enterprises, which are central to the American mortgage market, have been in government conservatorship since the financial crisis.
In a white paper, BlackRock criticized the "recap and release" approach, which would convert Fannie and Freddie into private entities. The firm described the plan as "fraught with ambiguities" and said it "would likely be disruptive to the market and would fail to provide an explicit government guarantee." BlackRock also questioned whether the enterprises would become "too big to fail," a designation that could bring them under closer oversight from the Federal Reserve.
The proposal is supported by prominent hedge fund managers, including Bill Ackman, Bruce Berkowitz, Richard Perry and John Paulson. BlackRock's critique positions the world's largest money manager against a segment of the alternative investment community on one of the most consequential questions in US housing finance policy.
In a white paper, BlackRock criticized the "recap and release" approach, which would convert Fannie and Freddie into private entities. The firm described the plan as "fraught with ambiguities" and said it "would likely be disruptive to the market and would fail to provide an explicit government guarantee." BlackRock also questioned whether the enterprises would become "too big to fail," a designation that could bring them under closer oversight from the Federal Reserve.
The proposal is supported by prominent hedge fund managers, including Bill Ackman, Bruce Berkowitz, Richard Perry and John Paulson. BlackRock's critique positions the world's largest money manager against a segment of the alternative investment community on one of the most consequential questions in US housing finance policy.
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