The trouble with Fannie and Freddie
By Sam Sutton
President Donald Trump wants to sell shares in Fannie Mae and Freddie Mac. And if you believe his Truth Social account, he wants to get a deal done before the end of the year. The structure of a Trump-led initial public offering of the housing-finance giants would be enormously consequential to a $9 trillion market for mortgage-backed securities that helps limit costs for American home buyers. And while an IPO could represent a major step toward ending Fannie and Freddie’s 17-year-old federal conservatorship, pulling it off will force the White House to figure out how to make the companies attractive assets for Wall Street without jeopardizing arrangements that are critical to the mortgage market. “It’s a tricky, tricky balancing act,” said Karen Petrou, the managing partner of Federal Financial Analytics. The administration’s plans for the offering are still hazy, but The WSJ’s initial reporting suggests it would value the two mortgage giants at about $500 billion and involve selling 5 percent to 15 percent of their stock. But if Trump is able to make that happen, it could open the door to future offerings that would simultaneously unwind the government’s ownership stake in the GSEs — which may help deficits — and boost the GSEs’ capital. But whether that results in changes to the MBS market is anyone’s guess. “They’ve got a ways to go,” Petrou said. “But the more stock they sell, the more capital they raise.”..