President Donald Trump is reportedly bringing the heads of America’s largest banks to the White House to talk about selling the government's stakes in mortgage giants Fannie Mae and Freddie Mac.
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Trump has openly talked about removing the government-sponsored enterprises from their conservatorships, which are one of the last remaining rescue measures in place after the Great Recession.
Trump invited JPMorgan Chase CEO Jamie Dimon to the White House last week to discuss Fannie and Freddie’s future, Bloomberg reported. David Solomon, Goldman Sachs' CEO, met with Trump on Thursday, while Bank of America CEO Brian Moynihan reportedly also has a meeting set up and further talks are expected to include other banks, according to Bloomberg.
The government would continue to guarantee loans from the two agencies after any stock offering, Trump said in May. A small number of Fannie and Freddie shares are traded publicly, while the government owns the vast majority.
Proposals to privatize the government-sponsored enterprises were floated while Trump was still on the campaign trail last September. Any plan to remove Fannie Mae and Freddie Mac from their conservatorships would be complicated, but Fannie and Freddie’s stocks jumped by 15% and 6%, respectively, in after-hours trading Thursday, according to Seeking Alpha.
Hedge funds and investment banks have long urged the government to release Fannie and Freddie from their conservatorships, eyeing potential windfalls for shareholders. If the enterprises are taken public via a stock offering, it could become one of the biggest initial public offerings on record and result in large fees for the banks leading it.
But the sale may not be as lucrative for the government, according to a report from the nonpartisan Congressional Budget Office. It found that the sale would generate $206B only if Fannie and Freddie were put into receivership.
Affordable housing advocates have called for the government safeguards to remain in place to ensure the many tens of billions of dollars in loans the entities purchase every year don't rise in cost for low-income Americans.
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