The Trump administration plans to release Fannie Mae and Freddie Mac from federal control through an initial public offering (IPO) during the current year which could result in a combined valuation of $500 billion and generate $30 billion from stock sales according to the Wall Street Journal.
The two companies have operated under federal oversight since their 2008 bailout because they acquire mortgages from lenders before creating securities that support U.S. housing finance. The privatization efforts for these companies have failed to progress throughout multiple years including during Trump’s initial presidential term.
The return of Trump to the White House has brought new energy to the privatization efforts. Bill Ackman who is a billionaire investor and shareholder has repeatedly asked the president to finish the privatization process. Trump declared that he would continue to oversee the companies after they become publicly listed.
The process of unwinding could become complex because the two companies guarantee trillions of dollars in outstanding mortgages. The stock prices of both companies surged by 21% following the news announcement.
