Win McNamee
Donald Trump’s allies and bankers are discussing how to end government control of Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) if the Republican presidential nominee is elected, people familiar with the matter told The Wall Street Journal.
A deal would potentially involve the government selling a portion of its holdings – valued at hundreds of billions of dollars – in the mortgage financing providers to large investors, including sovereign wealth funds.
Trump’s allies have discussed the Treasury Department partially backing certain Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) loans through a standby guarantee, according to the report. They also discussed bypassing congressional approval and proceeding through the Federal Housing Finance Agency.
Trump allies involved in the talks include Larry Kudlow, former National Economic Council director, and John McEntee, former White house presidential personnel office director.
The Trump administration tried to privatize Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC) in 2019, in a bid to protect taxpayers from future bailouts (like the one in 2008) and reduce the country’s deficit. However, it abandoned its pursuit amid concerns over the impact on the housing market.
To note, nearly 40% of the $435B of residential loans originated in Q2 were sold to Fannie Mae (OTCQB:FNMA) or Freddie Mac (OTCQB:FMCC), according to Inside Mortgage Finance.
Critics say privatizing these firms would decrease home buyers’ access to credit and increase taxpayer risk.
If they are privatized, hedge fund managers (and Trump backers) like Bill Ackman and John Paulson stand to benefit. Ackman’s Pershing Square owns an about 10% stake in both mortgage firms, while Paulson holds a sizable investment in the preferred shares.
