Are Fannie Mae and Freddie Mac Set for an IPO?
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The Trump administration is preparing an IPO for mortgage giants Fannie Mae and Freddie Mac.
Trump allies began laying the groundwork for this even before he was elected president last year. This has been a goal of Trump since his last administration.
Plus, a day of turmoil in the gold market. And what Americans' guilty pleasures mean for business. It's Friday, August 8th. I'm Alex Ocelev for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. We're exclusively reporting that the Trump administration is preparing to sell stock in mortgage giants Fannie Mae and Freddie Mac in an offering it believes could raise around $30 billion. The IPO would kick off later this year. That's according to people familiar with the matter. A small number of shares of the two mortgage giants already trade on the over-the-counter market. Cori Dreebush covers capital markets for The Journal and joins me now.
Cori, what do we know about this plan as it stands?
What we know is that Trump allies began laying the groundwork for this even before he was elected president last year. And it would value the Fannie Mae and Freddie Mac at roughly $500 billion or more. And the government would try to sell between 5% and 15% of the stock.
Given that these mortgage giants are under government conservatorship and have been since 2008, where would the money raised actually go?
Right now, proponents of such a transaction, which would be one of the largest stock offerings in history, the plan would be to potentially reduce the country's deficit and return money to taxpayers. That is what we are hearing. Obviously, things are still early on. A lot of things could change. There's a lot of moving parts.
Is the Trump administration planning an IPO for Fannie Mae and Freddie Mac?
You mentioned that this is a priority for the Trump administration, but why do this now?
Ever since 2008, when Fannie Mae and Freddie Mac were brought in conservatorship, it feels like there's been chatter about how do we get them out of conservatorship or how do we privatize? These discussions are happening. The six large banks, their CEOs have all gone down to D.C., have met with President Trump. They've also met with the Secretary of Commerce, the Secretary of Treasury, and the head of the Federal Housing Finance Agency, the FHFA. They've also been meeting with the CEOs and bankers. So this is a serious attempt to However, there's no guarantee a deal will come together. IPOs obviously take time to prepare, and this is really complicated. Previous attempts to privatize have failed to gain traction a lot because Fannie and Freddie have long benefited from the market expectation that the government would bail them out of trouble.
And that's known as this so-called implicit guarantee. The president has said he wants Fannie Mae and Freddie Mac to keep the guarantee in case of a public offering, but he hasn't been clear exactly on how that would work. Separately, the head of the FHFA in the past has suggested that Fannie and Freddie could remain under conservatorship even while conducting an IPO of their shares. But that also hasn't been clarified exactly how that will work.
That was WSJ reporter Cori Dreebush. Thank you, Cori.
Thanks.
In a separate development, President Trump has removed former Congressman Billy Long as the commissioner of the Internal Revenue Service. That's according to a senior White House official, who said that Long is being replaced on an interim basis by Treasury Secretary Scott Besant.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–2:26
2
Is the Trump administration planning an IPO for Fannie Mae and Freddie Mac?
2:26–8:35
3
What details are known about the proposed Fannie and Freddie offering and valuation?
8:35–10:08
4
Where would proceeds from a Fannie/Freddie IPO go while they're under conservatorship?
10:08–12:18
5
Why is the administration pushing to privatize Fannie Mae and Freddie Mac now?
12:18–13:23