Privatization of Fannie Mae, Freddie Mac Back on the Table

The upheaval in recent days at Fannie Mae and Freddie Mac hints at bigger plans from the Trump administration.

The federal government is entertaining proposals to release the two enterprises from its control, the Wall Street Journal reported. This time, the effort is being linked to one of Donald Trump’s novel ideas for the country: a sovereign wealth fund.

Last week, the administration reportedly entertained a proposal to transfer the Treasury Department’s ownership of the mortgage companies to a sovereign wealth fund. Trump announced the idea of such a fund in February, but it does not yet exist. Treasury Secretary Scott Bessent brought up a similar idea on a podcast last week.

According to one proposal reportedly making the government rounds, the enterprises could raise between $20 billion to $30 billion from investors, estimating the companies could be valued at more than $330 billion combined. That would value the government’s stake in the enterprises at more than $250 billion, creating a potential windfall for the government.

Privatization has been discussed since essentially the day the mortgage giants fell into government control in 2008. During Trump’s first administration, there was an effort to take the enterprises private, but that attempt was dropped in the waning days of his presidency.

Freddie and Fannie bundle and sell mortgages, backstopped by the government. Putting them back in private control is a delicate dance, as one wrong move could lead investors to demand higher premiums on the market, which could, in turn, cause mortgage rates to spike.

Fannie Mae and Freddie Mac support approximately 70 percent of the country’s mortgage market, according to the National Association of Realtors.

Whether or not they go private, Federal Housing Finance Agency head Bill Pulte is already destroying the status quo at the agency. In his first week, Pulte ousted more than a dozen board members at the two companies and installed himself as the chair of both boards. He also placed dozens of agency employees on administrative leave.

The Trump administration is considering issuing an executive order that, among other housing items, would direct departments to study the privatization matter.

— Holden Walter-Warner