President Donald Trump is cooking up a plan to throw Fannie Mae and Freddie Mac, the mortgage market’s biggest roommates, back into the stock market spotlight.
The Wall Street Journal spilled the beans, saying this could be the largest initial public offering ever, potentially raking in $30 billion. That’s enough to buy a lot of fancy coffee for the White House staff!
The plan isn’t set in stone yet. Trump’s team is still tossing ideas around, according to a senior administration official. They’re eyeing a sale of 5% to 15% of the companies’ shares, valuing the duo at a cool $500 billion.
Fannie and Freddie have been under government supervision since 2008, when they nearly tanked during the financial crisis. Think of them as the housing market’s safety net, catching mortgages and tossing them to investors. They guarantee 70% of America’s home loans, keeping the market humming.
Trump’s been itching to set these giants free for years. His first term saw a failed attempt to kick them out of government conservatorship.
Now, in his second term, he’s back at it, posting on Truth Social in May about “giving very serious consideration” to going public.
He’s not doing this alone. Trump has been chatting with Wall Street bigwigs, including JPMorgan’s Jamie Dimon, Goldman Sachs’ David Solomon, and Bank of America’s Brian Moynihan. These CEOs are pitching ideas on how to pull off this massive stock sale without tripping over their own feet.
The idea has some cheering. Republican allies argue Fannie and Freddie can stand on their own, and selling shares could help chip away at the government’s mountain of debt. It’s a tempting prospect when the national piggy bank is looking a bit empty.
But not everyone’s popping champagne. Economists warn that privatization could shake up the mortgage market, making home loans pricier. Moody’s Analytics’ Mark Zandi estimated in 2024 that new borrowers might shell out an extra $1,800 to $2,800 a year.
Critics also point out a potential catch. Hedge fund investors, who’ve been cozy with Fannie and Freddie for years, might scoop up most of the IPO profits. That means taxpayers could be left holding an empty wallet while Wall Street throws a party.
Back in 2008, Fannie and Freddie were publicly traded but hit rock bottom when home values crashed. The government stepped in, saving them from collapse right before Lehman Brothers’ fall sparked a global meltdown. They’ve been under Uncle Sam’s watchful eye ever since.
The companies don’t hand out mortgages themselves. Instead, they buy loans from lenders, bundle them into securities, and sell them to investors. This keeps cash flowing, making those 30-year mortgages possible, though rates have climbed lately for other reasons.
If this IPO happens, it could mark a return to their pre-2008 days as public companies with a Treasury safety net. The Federal Housing Finance Agency, their current babysitter, hasn’t commented on the plan. Neither has the White House, keeping things hush-hush for now.
Trump’s enthusiasm is clear. He promised on Truth Social to keep government guarantees in place, ensuring oversight while pushing for privatization. It’s a tricky balancing act, and he’s determined to stay in the driver’s seat.
The housing market’s stability is at stake. Realtor.com’s Jake Krimmel noted that Fannie and Freddie keep mortgage rates low and credit accessible. Any misstep could send rates soaring or tighten lending, especially during economic hiccups.
Questions linger about how this will play out. Will there be a clear federal backstop? How will capital rules balance affordability with financial strength?
Shares of both companies jumped 22% on Friday after the news broke, their biggest gain in over two months. Investors are clearly excited, betting on a big payout. The market’s buzzing, but the details remain foggy.
Trump’s team is moving fast, aiming for a possible launch before 2025 ends. They’ve been meeting with bank leaders to hash out the logistics of this complex deal. It’s a high-stakes game, and they’re playing for keeps.
The plan could reshape housing finance. Fannie and Freddie’s role in supporting homeownership is massive, and any change could ripple across the country. For now, everyone’s watching to see if Trump can pull off this blockbuster IPO.
Whether it’s a home run or a fumble, the outcome will affect millions of borrowers. The mortgage giants’ future is up in the air, and Trump’s ready to swing for the fences. Stay tuned for the next chapter in this $500 billion saga.
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