The Trump administration plans to release Fannie Mae and Freddie Mac from their conservatorships without designating them as systemically important financial institutions.

That would keep Fannie and Freddie free of the stringent “enhanced prudential standards” set by the Federal Reserve for the biggest financial institutions in the U.S. Designation as a systemically important financial institution, or SIFI, by the Financial Stability Oversight Council is intended to reduce the risk that a company will pose a threat to U.S. financial stability.

“We would go to FSOC and before we raised public capital we would make sure we understood that there was enough capital so that they did not need to be designated,” Treasury Secretary Steven Mnuchin said in a Senate hearing on Tuesday.

Federal Housing Finance Agency director Mark Calabria said that he agreed with this approach. Secretary Mnuchin is chairman of FSOC and holds veto power over any SIFI designation.

Fannie Mae is larger than J.P. Morgan Chase. Freddie Mac is larger than Citigroup. Both banks are officially designated SIFIs.

The plan to keep Fannie and Freddie, which have over $5 trillion in assets, outside SIFI regulation will likely come as a relief to investors in the companies. It could also leave them more vulnerable in a financial crisis and more likely to require taxpayer support.

Prior to their collapse and bailout in 2008, Fannie and Freddie were exempt from regulations that applied to most large financial companies and instead regulated by a tailor-made agency widely believed to be under their sway, a situation economists refer to as “regulatory capture.” Since 2008, they have been wards of the state overseen by the Federal Housing Finance Agency. Releasing them without SIFI designation would once again set them up under a segregated regulatory regime similar to the one they enjoyed pre-crisis.

While the administration’s position against SIFI designation might be a boon to hedge funds and other large investors who own much of the common and junior preferred shares, it puts the administration at odds with housing reform experts. Senator Mark Warner (D-Virginia) pointed out that in a recent Senate banking committee hearing “every witness across the intellectual spectrum supported SIFI designation.”

“They obviously should be designated as SIFIs,” Alex J. Pollock, the distinguished senior fellow at the R Street Institute, said in an interview with Breitbart News. “It is for the benefit of the financial system. In my opinion, it is absolutely required. You should absolutely designate them if you want to keep them under control and you absolutely should want to keep them under control.”

Pollock testified in favor of SIFI designation at the recent hearing cited by Senator Warner.

“I believe FSOC should formally designate Fannie and Freddie as SIFIs and strongly recommend that action.  That would be consistent with the clear provisions of the Dodd-Frank Act.  In my opinion, the country needs Fannie and Freddie to be integrated into the efforts to understand and deal with systemic risk.  Without including Fannie and Freddie, these efforts are woefully incomplete,” Pollock told the banking committee.