HENDERSON: An aerial view of homes on November 6, 2008, in Henderson, Nevada. Foreclosures that year … [+] fueled a mortgage crisis downhill spiral. (Photo by Ethan Miller/Getty Images)
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If the incoming Trump Administration picks up where it left off, the last unfinished business of the 2008 financial crisis may soon be addressed. That business? Reforming a housing finance system that has been stuck in a sort of high-functioning limbo for more than 16 years.
Housing received considerable attention in the recent election, but that focus was on increasing supply, lowering prices, and providing downpayment help. Absent was a discussion about the federal agencies and programs that ensure ready access to loans for homeownership.
The U.S. housing finance system has largely recovered from the 2008 financial crisis, when the housing market collapsed. Contributing factors in the years leading up to the crisis included unsustainable home price increases, relaxed lending requirements, and an influx of subprime mortgages. Loosened lending was enabled by an increasingly sophisticated set of finance tools—mortgage-backed securities and related derivative products—used by lenders and Wall Street firms. That dynamic led to an expansion of mortgage availability that drove unsustainable house price increases.[1]
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Rising prices led to a belief they would continue to rise, further inflating prices. All was well until prices peaked, and then declined, as high-risk borrowers found it difficult to refinance or sell to settle mortgage debts. Falling prices accelerated as default-driven homes for sale flooded the market. Weakened mortgage lenders then began defaulting on their own lines of credit. Wall Street quickly lost its appetite for risky mortgages and credit markets began to freeze. By late 2008, the seismic impacts of the U.S. housing downturn were being felt across the global economy.
In Washington D.C., policymakers authorized and executed on a series of legislative, regulatory, and operational reforms—often intended as triage-like treatments to stabilize the system—to ensure continued strong mortgage market liquidity. A complete market meltdown was prevented.
Since then, however, the system has progressed without a cohesive and comprehensive reconsideration. Instead, mortgage guarantee agencies and government-sponsored enterprises (GSEs) have adapted their operations and processes to meet evolving market circumstances, but only on the margin. That could change if the incoming administration decides to continue efforts the first Trump Administration initiated in 2019 to overhaul the system.
Beyond addressing housing finance, there is also a need to expand the supply and affordability of housing by making it easier to provide more types of housing in places where people want to live. A common thread through the nation’s housing affordability crisis is the fact that the supply of homes built has been insufficient to keep up with demand. While a healthy finance system is critical, that alone is insufficient to expand the nation’s supply of housing to meet current and future needs. That said, the rest of this essay focuses on housing finance.
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Is A Bigger FHA Here To Stay?
Many of the stabilization measures enacted in response to the 2008 crisis (such as the Troubled Assets Relief Program) were wound down as the economy recovered. But that was not the case at the Federal Housing Administration, the main U.S. agency that guarantees loans made by lenders to homebuyers. FHA dramatically expanded its role as private lending rapidly receded, precisely the countercyclical role envisioned for the agency at its founding in 1934. In fact, FHA’s market share jumped from less than 4% in 2006 to a quarter of all home purchases during the crisis.
Today, the agency continues to back mortgages at elevated, though moderated, levels. Its portfolio of loan guaranties continues to grow and, according to a 2023 report issued by Arnold Ventures (which I authored), rose 171% in inflation-adjusted terms from 2007 to 2023. While a growing portfolio poses potential risks to taxpayers, loans originated since the crisis have performed much better than those made previously. FHA has improved its lending guidelines and adopted improvements such as risk-based underwriting.
Budgetarily, FHA’s single family mortgage insurance programs were projected to result in savings each year from 2000 to 2009. Premium revenues were forecast to far exceed payments on claims. However, after the 2008 crisis, it became clear loans made in those years cost (rather than saved) billions of dollars. Making matters worse, those savings that never materialized were spent elsewhere (showing the danger of mixing cash and accrual budgeting concepts).
Since then, and even with substantial increases in lending volumes, performance has been more in line with forecasts and has, at times, exceeded expectations. Based on supplemental data contained in the 2025 Budget, increasingly reliable forecasts have reflected more in savings than were realized before the crisis. Nevertheless, risks remain that could impact taxpayers in a significant economic downturn.
But FHA’s role in the housing finance system has proven beneficial during and after the financial crisis. While there is no compelling need for reform, legislative efforts to refresh the GSEs could pull FHA (and its sister agency Ginnie Mae) into the fray to ensure roles are harmonized.
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Will Fannie/Freddie Conservatorship End?
The primary function of the GSEs, Fannie Mae and Freddie Mac, is to facilitate liquidity in the U.S. mortgage finance system. They purchase home loans made by banks and other lenders—known as conforming loans since they must meet strict size and underwriting standards— and pool those loans into mortgage-backed securities, which are then sold to investors. Those securities are favored because the GSEs guarantee full principal even if the underlying mortgages default. The GSEs typically finance more than half of all mortgages originated.
The GSEs are private companies created by the U.S. government. During the financial crisis, Fannie and Freddie were placed into conservatorship by their then-newly created regulator, the Federal Housing Finance Agency. While not at that point insolvent, their earnings and capital were deteriorating as house prices fell and their capacity to absorb further losses was in doubt. A driving concern was that if they failed due to substantial defaults on their insured mortgage portfolios or an inability to issue debt to finance themselves, the crisis would have escalated dramatically.
Conservatorship is an odd legal place for any organization to reside for an extended period—with a third party (in this case FHFA) in operational control. Conservatorship was expected to last only a short time. Then-Treasury Secretary Henry Paulson dubbed the move a “time out” to give policymakers an interval to decide their future. But the GSEs have remained there for more than 16 years, with occasional changes to conservatorship terms. In recent years, the Biden Administration has shown little interest in resolving the matter.
If actions during the first Trump presidency are any indicator, the incoming administration will be more assertive in tackling the issue. A memorandum issued by President Trump on March 27, 2019, stated that “The lack of comprehensive housing finance reform since the financial crisis of 2008 has left taxpayers potentially exposed to future bailouts, and has left the Federal housing finance programs at the Department of Housing and Urban Development potentially overexposed to risk and with outdated operations.” The memo goes on to point out that reforms are needed “to reduce taxpayer risks, expand the private sector’s role, modernize government housing programs, and make sustainable home ownership for American families our benchmark of success.”
The Treasury Secretary was directed to develop a plan to end the conservatorship, facilitate competition in housing finance, operate the GSEs in a safe and sound manner, and ensure the government is properly compensated for any backing. Under the direction of then-Secretary Steven Mnuchin, Treasury published such a plan in September 2019 proposing both legislative and administrative reforms. FHFA and Treasury then began carrying out the parts of the plan that could be done administratively.
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Former FHFA Director Mark Calabria wrote about those actions in his 2023 book Shelter from the Storm. Plans were being made “to bring the conservatorships to an end, restructure the balance sheets, and end the illegal line of credit, while preserving stability in the mortgage market.” But those plans were pushed until after the election to avoid any market disruptions that might occur, particularly given risks posed to the economy by the COVID-19 pandemic.
Consequently, some key actions were completed while others remained on the drawing board. The GSEs were allowed to build capital by retaining earnings and, in a related move, FHFA established a post-conservatorship minimum capital rule. The outgoing administration left a blueprint for reform to end the conservatorship, compensate taxpayers, and allow the GSEs to raise third-party capital.[2]
The Need For Congressional Action
While the new administration can take steps to reform and release the GSEs from conservatorship, a transformed and well-coordinated housing finance system will require legislative action as well. The activities of housing finance agencies like FHA and the GSEs should complement each other. Roles need to be clearly defined, overlap avoided, and taxpayer risks minimized.
The new Congress and incoming administration must explicitly determine those roles. While objectionable levels of risk have accrued in the past, the housing finance system has operated much more soundly in recent years. Legislation should be structured to lock in the operational and financial improvements since the financial crisis and to codify reforms to further strengthen the system.
The nation’s housing market depends on a robust and dynamic housing finance system. While maintaining the status quo follows a path of least political resistance, it will be interesting to see if a second Trump Administrations picks up its past pursuit of comprehensive reform.
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[1] For a fuller explanation of the conditions that led to the crisis, see Subprime Mortgage Crisis, by John V. Duca, Federal Reserve Bank of Dallas, November 22, 2013.
[2] For a detailed explanation of events during and after conservatorship see: The GSE Conservatorships: Fifteen Years Old, With No End in Sight, by former Freddie Mac CEO Donald H. Layton, September 5, 2023.
The up-and-coming fintech scored a pair of fourth-quarter beats.
Diversified fintech Chime Financial(CHYM +12.88%) was playing a satisfying tune to investors on Thursday. The company’s stock flew almost 14% higher that trading session, thanks mostly to a fourth quarter that featured notably higher-than-expected revenue guidance.
Sweet music
Chime published its fourth-quarter and full-year 2025 results just after market close on Wednesday. For the former period, the company’s revenue was $596 million, bettering the same quarter of 2024 by 25%. The company’s strongest revenue stream, payments, rose 17% to $396 million. Its take from platform-related activity rose more precipitously, advancing 47% to $200 million.
Image source: Getty Images.
Meanwhile, Chime’s net loss under generally accepted accounting principles (GAAP) more than doubled. It was $45 million, or $0.12 per share, compared with a fourth-quarter 2024 deficit of $19.6 million.
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On average, analysts tracking the stock were modeling revenue below $578 million and a deeper bottom-line loss of $0.20 per share.
In its earnings release, Chime pointed to the take-up of its Chime Card as a particular catalyst for growth. Regarding the product, the company said, “Among new member cohorts, over half are adopting Chime Card, and those members are putting over 70% of their Chime spend on the product, which earns materially higher take rates compared to debit.”
Today’s Change
(12.88%) $2.72
Current Price
$23.83
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Key Data Points
Market Cap
$7.9B
Day’s Range
$22.30 – $24.63
52wk Range
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$16.17 – $44.94
Volume
562K
Avg Vol
3.3M
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Gross Margin
86.34%
Double-digit growth expected
Chime management proffered revenue and non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance for full-year 2026. The company expects to post a top line of $627 million to $637 million, which would represent at least 21% growth over the 2024 result. Adjusted EBITDA should be $380 million to $400 million. No net income forecasts were provided in the earnings release.
It isn’t easy to find a niche in the financial industry, which is crowded with companies offering every imaginable type of service to clients. Yet Chime seems to be achieving that, as the Chime Card is clearly a hit among the company’s target demographic of clientele underserved by mainstream banks. This growth stock is definitely worth considering as a buy.
ROCHESTER, N.Y. — Student athletes are now earning real money thanks to name, image, likeness deals — but with that opportunity comes the need for financial preparation.
Noah Collins Howard and Dayshawn Preston are two high school juniors with Division I offers on the table. Both are chasing their dreams on the field, and both are navigating something brand new off of it — their finances.
“When it comes to NIL, some people just want the money, and they just spend it immediately. Well, you’ve got to know how to take care of your money. And again, you need to know how to grow it because you don’t want to just spend it,” said Collins Howard.
What You Need To Know
High school athletes with Division I prospects are learning to manage NIL money before they even reach college
Glory2Glory Sports Agency and Advantage Federal Credit Union have partnered to give young athletes access to financial literacy tools and credit-building resources
Financial experts warn that starting money habits early is key to long-term stability for student athletes entering the NIL era
Preston said the experience has already been eye-opening.
“It’s very important. Especially my first time having my own card and bank account — so that’s super exciting,” Preston said.
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For many young athletes, the money comes before the knowledge. That’s where Glory2Glory Sports Agency in Rochester comes in — helping athletes prepare for life outside of sports.
“College sports is now pro sports. These kids are going from one extreme to the other financially, and it’s important for them to have the tools necessary to navigate that massive shift,” said Antoine Hyman, CEO of Glory2Glory Sports Agency.
Through their Students for Change program, athletes get access to student checking accounts, financial literacy courses and credit-building tools — all through a partnership with Advantage Federal Credit Union.
“It’s never too early to start. We have youth accounts, student checking accounts — they were all designed specifically for students and the youth,” said Diane Miller, VP of marketing and PR at Advantage Federal Credit Union.
The goal goes beyond what’s in their pocket today. It’s about building habits that will protect them for life.
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“If you don’t start young, you’re always catching up. The younger you start them, the better off they’re going to be on that financial path,” added Nihada Donohew, executive vice president of Advantage Federal Credit Union.
For these athletes, having the right support system makes all the difference.
“It’s really great to have a support system around you. Help you get local deals with the local shops,” Preston added.
Collins-Howard said the program has given him a broader perspective beyond just the game.
“It gives me a better understanding of how to take care of myself and prepare myself for the future of giving back to the community,” Collins-Howard said.
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“These high school kids need someone to legitimately advocate their skills, their character and help them pick the right space. Everything has changed now,” Hyman added.
NIL opened the door. Programs like this one make sure these athletes walk through it — with a plan.
With the introduction of the Employee Ownership Development Act , Illinois is poised to create the largest dedicated public investment vehicle for employee ownership in the country.
State Rep. Will Guzzardi’s bill, HB4955, would authorize the Illinois Treasury to deploy a portion of the state’s non-pension investment portfolio into employee ownership-focused investment funds.
That would represent a substantial investment of institutional capital in building wealth for Illinois workers and seed a capital market for employee ownership in the process. And because the fund is carved out of the state investment pool, it doesn’t require a single dollar of appropriations from the legislature.
Silver tsunami
The timing of the Employee Ownership Development Fund could not be more urgent. More than half of Illinois business owners are over 55 years old and are set to retire in the coming decade. When these owners sell their firms, financial buyers and competitors are often the default exit – if owners don’t simply close the business for lack of a buyer.
Each of these traditional paths risks consolidation, job loss and offshoring of investment and production. These are major disruptions to the communities that have long sustained these businesses. Without a concerted strategy, business succession is an economic development risk hiding in plain sight, and one that threatens local employment, supply chain resilience, and the tax base of communities across the country.
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Employee ownership offers another path. Decades of empirical research show that employee-owned firms grow faster, weather economic downturns better (with fewer layoffs and lower rates of closure), and provide better pay and retirement benefits.
The average employee owner with an employee stock ownership plan, or ESOP, has nearly 2.5 times the retirement wealth of non-ESOP participants. That comes at no cost to the employee and is generally in addition to a diversified 401(k) retirement account.
Because businesses are selling to local employees, employee ownership transitions keep businesses rooted in their communities. This approach can support a place-based retention strategy for state economic policymakers.
Capital gap
Despite the remarkable benefits of employee ownership and bipartisan support from policymakers, a lack of private capital has impeded the growth of employee ownership: In the past decade, new ESOP formation has averaged just 269 firms per year.
Most ESOP transactions ask the seller to be the bank, relying heavily on sellers to finance a significant portion of the sale themselves, often waiting five to 10 years to fully realize their proceeds. Compared to financial and strategic buyers who offer sellers their liquidity upfront, employee ownership sales are structurally uncompetitive in the M&A market.
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A small but growing ecosystem of specialized fund managers has begun to fill this gap. They deploy subordinated debt and equity-like capital to provide sellers the liquidity they need, while supporting newly employee-owned businesses with expertise and growth capital (see for example, “Apis & Heritage helps thousands of B and B Maintenance workers become owners”).
This approach is a recipe for scale, but the market remains nascent and undercapitalized relative to the generational pipeline of businesses approaching succession. To mature, the market needs anchor institutional investors willing to commit capital at scale.
State treasurers and other public investment officers could be those institutional investors. Collectively managing trillions of dollars in state assets, they have the portfolio scale, time horizons and fiduciary obligation to earn market returns while advancing state economic development.
Illinois’ blueprint
Just as federal credit programs helped catalyze the home mortgage and venture capital industries in the 20th century, state treasurers and comptrollers now have the opportunity to help build the employee ownership capital market in the 21st.
Illinois shows us how. The state’s Employee Ownership Development Act is modeled on proven investment strategies previously authorized by the legislature and pioneered by State Treasurer Michael Frerichs. The Illinois Growth and Innovation Fund and the FIRST Fund each ring-fence 5% of the state investment portfolio for investments in private markets and infrastructure, respectively, deployed through professional fund managers. Both have generated competitive returns while catalyzing billions of dollars in private co-investment in Illinois.
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The Employee Ownership Development Fund would apply that same architecture to employee ownership. The Treasurer would invest indirectly by capitalizing private investment funds deploying a range of credit and equity. The funds, in turn, would invest a multiple of the state’s commitment in employee ownership transactions.
The employee ownership field has matured to a point that is ready for institutional capital. The evidence base is robust. The fund management ecosystem is growing. And the business succession pipeline is larger than it will be for generations.
Yet the field still lacks the publicly enabled financing interventions that have historically built new markets in this country. State treasurers, city comptrollers and other public investment officers have the tools and resources at their disposal to provide that catalytic, market-rate investment to enable the employee ownership market to scale.
Julien Rosenbloom is a senior associate at the Lafayette Square Institute.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
