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The Week Ahead: Senate Expected to Vote on Mnuchin Appointment

Steven Mnuchin

On Monday the U.S. Senate is expected to vote on the confirmation of hedge fund manager and former Goldman Sachs partner Steven Mnuchin as Treasury Secretary.

The full senate vote comes after Democrats on the Senate Finance Committee previously boycotted his approval. Mnuchin, 54, who served as the President Trump’s national finance chairman during his campaign, previously [1] laid out a number of his initiatives should the U.S. Senate confirm him as the 77th Treasury Secretary. These included the roll back the Dodd-Frank Wall Street Reform and Consumer Protection Act and the end the governmental conservatorship of Fannie Mae and Freddie Mac.

If confirmed by the Senate, Mnuchin would succeed Jack Lew, who took office on February 28, 2013 under former President Barack Obama. Adam Szubin is currently serving as acting secretary. Mnuchin would be the third former Goldman Sachs executive to lead the Treasury after Henry M. Paulson and Robert E. Rubin.

The vote, which is set for 7 p.m. EST, is expected to come down to 52-48 in favor of Mnuchin with the Senate voting along party lines.

Fannie Mae Q4 Earnings and Year-End 2016 Report

This week Fannie Mae's Q4 earnings will be released. In Q3, Fannie Mae reported net income of $3.2 billion [2], comprehensive income of $3 billion, and a positive net worth of $4.2 billion for the third quarter. That means that Fannie Mae expects to pay the U.S. Department of Treasury [3] a $3 billion dividend in December.

Net revenues were up for the GSE. In Q3 net revenues were $5.6 billion. In Q2, they were $5.5 billion. Similarly, net interest income rose from $5.3 billion to $5.4 billion for the third quarter. Fannie Mae's Q3 net income of $3.2 billion was an increase from Q2's net income of $2.9 billion and from Q3 2015's net income of $2.2 billion. Overall, Fannie Mae took the report as positive news, which it has not often been able to do in recent years.

Net fair value losses were down. In Q3 they were $491 million, compared with $1.7 billion in Q2. Fannie Mae attributed the Q3 losses mainly to losses on Connecticut Avenue Securities debt.

Credit-related income was also down in Q3. Fannie Mae reported $563 million in credit-related income in the third quarter, compared with $1.5 billion in Q2. Fannie Mae attributed this to an increase in home prices, including distressed property valuations.

Single-family net income was $1.9 billion in Q3, driven primarily by guaranty fee income and credit-related income. This was also a drop. In Q2, the total was $2.7 billion. Single-family guaranty fee income remained at $3.3 billion for Q3.

Fannie Mae's Q4 report will be released on February 17th. How will it compare with Q3's strong earnings?

Wednesday February 15, 2017

National Association of Home Builders Housing Market Index, 10 a.m. EST

Thursday February 16, 2017

Bloomberg Consumer Comfort Index, 10:00 a.m. EST