A privatized Fannie Mae and Freddie Mac would still have public backing, President Donald Trump said Tuesday night.
President Donald Trump has made two statements about privatizing Fannie Mae and Freddie Mac this month.
One week after announcing that his administration was “giving serious consideration” to bringing the mortgage market makers public, Trump expanded on his vision.
The federal government will continue to guarantee the loans packaged and sold by the agencies after any stock offering, the president posted to Truth Social, his social media platform.
Trump said in another post on May 21 that he was working with Treasury Secretary Scott Bessent, Secretary of Commerce Howard Lutnick and Bill Pulte, the director of the Federal Housing Finance Agency, on a potential plan to take the government-sponsored enterprises public.
He said at the time that a decision would be made in the near future. Trump’s latest post seems to suggest that the president is moving ahead on a push to relinquish government control of the agencies, which purchase mortgages from lenders and repackage them as investment vehicles that underpin the U.S. mortgage market.
The agencies’ stock, which is currently traded over the counter, soared on both announcements.
Fannie Mae’s stock ticked up 7% Wednesday on Trump’s most recent pronouncement, while Freddie Mac gained more than 11%. Fannie Mae and Freddie Mac stocks have exploded this year, up 231% and 151%, respectively, amid rampant speculation about privatization.
Trump began the process of unwinding the government’s oversight, known as conservatorship, during his first term but was stalled by the pandemic. Talk about privatization was swirling among Trump’s advisers even before he won his bid for a second term. After retaking the White House, Trump was weighing an executive order to explore privatization.
One proposal reportedly circulating the White House would see the government raise up to $30B through stock offerings for Fannie Mae and Freddie Mac while maintaining a stake valued above $250B. Bessent suggested on a podcast in March that the cash raised by the government could go towards the creation of a new sovereign wealth fund.
The federal government’s guarantee to cover agency debt is the key sticking point of any plan to end conservatorship. Prior to the Global Financial Crisis, investors operated under the assumption that the federal government wouldn’t allow the mortgage market to collapse.
That implicit guarantee was tested by the subprime mortgage crisis, and it became explicit after the federal government poured cash into the mortgage-backed securities market and took over the agency lenders.
Calls for privatization have been met with some skepticism on Capitol Hill. Massachusetts’ Sen. Elizabeth Warren asked pointed questions to Pulte in a 23-page open letter ahead of his confirmation hearings about the potential for corruption to make its way into the process.
She said she had concerns that major shareholders — which include Pershing Square CEO Bill Ackman and billionaire hedge fund investor John Paulson — could get information from the government about its plans before the general public. She also pressed Pulte, part of the family behind homebuilder PulteGroup, on his own investments.
She specifically asked Pulte to disclose any conversations about privatization he had already had with Trump, Ackman or Paulson, as well as other members of the administration.
