Trump Claims Fannie, Freddie Are Worth Combined $1T

Bill Pulte’s national intelligence shocker wasn’t the only turbulent moment for the Federal Housing Finance Agency last week.

During a seemingly unrelated event on Thursday, Donald Trump floated a $1 trillion combined value for Freddie Mac and Fannie Mae, Bloomberg reported. The declaration briefly sent shares in the two mortgage giants soaring, before those gains disappeared.

The valuation didn’t hold up to rigor for experts. KBW analyst Bose George quickly stood by the company’s valuation of the government-sponsored enterprises, a “combined fair value in the $200 billion to $250 billion range.”

Fannie shares jumped by as much as 10.4 percent on Friday; Freddie shares skyrocketed as much as 9.7 percent. But both organizations are down approximately 30 percent year-to-date in the market.

The valuation of the two organizations could be critical to a potential initial public offering in the works.

Last year, it was reported that the administration wanted to sell shares in the two government-backed mortgage giants — under federal conservatorship since their 2008 bailout — at a valuation that could reach $500 billion and raise about $30 billion. A higher valuation could help it raise even more.

The deal would bring a windfall for the federal government, which holds warrants for roughly 80 percent of both firms’ common stock. But the stakes are enormous, too, as Fannie and Freddie underpin nearly half of all U.S. mortgages, so any misstep could ripple through housing markets and consumer borrowing.

The IPO is in further doubt after FHFA director Bill Pulte was named acting director of national intelligence by President Trump, despite his lack of intelligence experience, while continuing to lead the Federal Housing Finance Agency, which oversees Fannie and Freddie. It’s unclear how Pulte plans to lead both agencies at the same time.

Wedbush’s Michael Piccolo recently questioned if Pulte has the “bandwidth required to advance the complex regulatory and capital restructuring work necessary for a recap and release” of the two enterprises.

— Holden Walter-Warner