Kudlow, who called Fannie, Freddie profit sweep a ‘scam,’ is at center of White House housing reform plans

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Bloomberg News
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Larry Kudlow, director of the U.S. National Economic Council

The memo signed by President Donald Trump on Wednesday outlining how the White House will approach ending the conservatorship of Fannie Mae and Freddie Mac puts Larry Kudlow, his economic adviser, at the center of process.

The memo says that what’s called the Treasury Housing Reform Plan — mostly, the privatization ideas for Fannie Mae and Freddie Mac, as well as the HUD Reform Plan, which centers around the future of the Federal Housing Administration — will be submitted “to the President for approval, through the Assistant to the President for Economic Policy, as soon as practicable.”

Related: White House keeps option of going alone on Fannie Mae, Freddie Mac privatization

The Assistant to the President for Economic Policy is Kudlow, more popularly known as the director of the National Economic Council.

Kudlow’s own take on Fannie












FNMA, +8.18%










 and Freddie












FMCC, +7.48%










  has been sympathetic to its shareholders, who for all practical intents and purposes have been wiped out by the government’s sweep of their profits into the Treasury.

His tweets before entering the White House make that clear.

Kudlow as recently as 2017 called the profit sweep a “scam.”

Courts have disagreed. A U.S. appeals court last year found the 2012 profit sweep was legal, as have multiple circuit courts. The Supreme Court opted not to take a case about the profit sweep.The Obama White House argued that even though Fannie and Freddie have repaid more than the $188 billion the Treasury injected in capital through the profit sweep, the payments don’t compensate for the continued risk the public bears.

Hedge funds have placed big bets on being rewarded on some point as the government privatizes the mortgage giants. Both stocks have soared this year.





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