President Donald Trump is consulting with major bank CEOs about strategies for privatizing mortgage giants Fannie Mae and Freddie Mac, marking his most concrete steps yet toward ending nearly two decades of federal control over the companies that support 70% of US mortgages.
The president has held discussions with JPMorgan Chase CEO Jamie Dimon at the White House, with additional meetings planned for Goldman Sachs CEO David Solomon and Bank of America CEO Brian Moynihan, according to Bloomberg.
The president is seeking ideas on how to structure what could become the largest initial public offering in history and exploring how major banks might participate in the process, sources familiar with the matter said.
Shares of both companies surged earlier this year when Trump first announced his privatization interest, with Fannie Mae climbing 51% and Freddie Mac jumping 42% to their highest levels since the 2008 financial crisis.
Trump first signaled his renewed interest in privatization in May, posting on Truth Social that he was giving “very serious consideration” to taking the companies public, noting they were “throwing off a lot of CASH.”
Fannie Mae and Freddie Mac have operated under federal conservatorship since September 7, 2008, when they nearly collapsed amid the subprime mortgage crisis. The companies lost over $200 billion during the financial crisis but have since returned to profitability and repaid their Treasury loans.
Previous economic analysis has warned privatization could increase mortgage rates by 0.43% to 0.97%, potentially costing homeowners $1,800 to $2,800 annually, according to estimates from Moody’s Analytics.
“The last thing we need is to privatize them in a way that rewards Wall Street while driving up housing prices for people already struggling to buy homes,” said Sen. Elizabeth Warren, D-Mass., the ranking Democrat on the Senate Banking Committee.
Trump attempted similar privatization efforts during his first term but was unsuccessful due to the complexity involved. The process would require resolving the government’s $330 billion investment and determining fees for Treasury’s $250 billion credit line backing.
Supporters argue privatization would remove $8 trillion in liabilities from the government’s balance sheet and generate substantial profits for taxpayers. Hedge fund manager Bill Ackman, whose firm holds major stakes in both companies, has estimated the move could generate $300 billion in additional government profits.
Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
