Fannie Mae and Freddie Mac IPO Plans Unveiled by Trump Administration

The Trump administration plans to sell stock in Fannie Mae and Freddie Mac, potentially raising $30 billion, with a value of around $500 billion combined. The mortgage giants may IPO as one company or two separate entities. The offering is expected to kick off later this year.

The Trump administration is set to sell stock in Fannie Mae and Freddie Mac, potentially raising $30 billion, with a combined value of around $500 billion. The mortgage giants may IPO as one company or two separate entities, with the offering expected to commence later this year. The plan involves selling between 5% and 15% of their stock, according to individuals familiar with the matter [1].

The Trump administration has been laying the groundwork for this move since before his re-election. The CEOs of six major banks—Morgan Stanley, JPMorgan Chase, Goldman Sachs, Citigroup, Wells Fargo, and Bank of America—recently met with President Trump to discuss potential plans for Fannie and Freddie. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Bill Pulte, head of the Federal Housing Finance Agency, were also present at several of these meetings [1].

Fannie and Freddie, which bundle and sell mortgages, have been under government control since the 2008 financial crisis. The companies rely on a government-backed guarantee to protect investors from losses. It remains unclear whether they will continue to operate under government conservatorship post-IPO. Previous attempts to privatize the firms, including during Trump's first term, failed to gain traction [1].

The offering is expected to take time to prepare, as it involves a complex process for such a large-scale IPO. Some bankers are skeptical about the feasibility of meeting the administration's timeline. Proponents argue that such a transaction could reduce the country’s deficit and return money to taxpayers. However, mortgage rates could rise without the government's implicit guarantee [1].

The Treasury Department holds warrants to purchase about 80% of Fannie and Freddie's common stock and also holds senior preferred shares. Other investors own junior preferred shares or common stock. The government would be selling stock in the offering [1].

References:
[1] https://www.wsj.com/finance/regulation/trump-aiming-to-ipo-fannie-mae-and-freddie-mac-later-this-year-13b138cf