Potential Privatization Freddie Mac and Fannie Mae

Blog posted On December 13, 2016

During the financial crisis Fannie Mae and Freddie Mac were bailed out for approximately $188 Billion and have remained under government conservator-ship since then.  However, President-elect Trump’s incoming Treasury Secretary, Steven Mnuchin, has said, “we’ve got to get them out of government control.  […] In many cases, this displaces private lending in the mortgage markets, and we need these entities that will be safe.”

Fannie and Freddie have since rapid their bailout funds and post billion dollar profits quarterly and hold over $5 Trillion in mortgage assets combined.  If the government does release the GSEs, any hedge funds that bought stock when it was trading low will benefit immensely.  The Obama administration did not make plans to release the GSEs. 

Since the news broke, Fannie and Freddie’s stock has shot up, both more than 30%, up more than 140% this year.  In 2014, shareholders lost a lawsuit against the government, effectively blocking the route to privatization. 

Mnuchin listed the release of Fannie and Freddie as one of his top ten priorities as Treasury Secretary.  Another project he mentioned was the rollback of the Dodd Frank Act, freeing banks to lend and trade. 

Sources: Forbes, HousingWire, Fox Business