Trump Allies Reportedly Float Privatizing Fannie And Freddie

Fannie Mae building

Former members of Donald Trump’s administration have been working on plans to sell the U.S. government’s control of Fannie Mae and Freddie Mac, The Wall Street Journal reports.

Former National Economic Council Director Larry Kudlow and former White House Presidential Personnel Director John McEntee are some of the figures involved in the discussions, according to the Journal.

Supporters of privatizing the government-sponsored multifamily lenders contend the move would reduce the U.S. deficit and return cash to taxpayers’ pockets. Critics, meanwhile, said it would add to risk for taxpayers and make it harder for would-be homebuyers to access the credit they need.

It is unclear whether Trump has endorsed the plans, but a spokesperson for the former president’s campaign told the WSJ that Trump “himself has never said anything about this throughout the campaign.”

But former administration officials have been talking about the proposal since at least the spring, including talking to investment managers about how to do it, the WSJ reported.

The government’s Fannie and Freddie stake could be worth hundreds of billions of dollars but would also need interest from some of the world’s biggest investors, such as sovereign wealth funds. Trump’s allies have talked about getting standby guarantees to partially back a certain amount of the agency loans and finding well-capitalized buyers to avoid destabilizing the housing market, the WSJ reported.

Different methods of privatization are reportedly being explored, including Trump authorizing the action through the president's control of the Federal Housing Finance Agency to circumvent the need for an endorsement from Congress.

Fannie and Freddie were government-sponsored, private institutions that the FHFA put into conservatorship in 2008 after a $190B bailout from the federal government. The agencies paid back the funding by 2014 and had repaid $301B in dividends to the Treasury Department by the end of 2019, according to the Congressional Budget Office.

The agencies, which buy and securitize residential and multifamily debt, support around 70% of the country's mortgage market, according to National Association of Realtors data cited by Bankrate.

NAR also wants Freddie and Fannie reform and has advocated for the agencies to be rechartered as privately held utilities. It is unclear whether the trade association is involved with discussions around Fannie and Freddie’s privatization.

“Because we don’t get involved with the presidential race and do not [weigh in on] the candidates’ agenda/plans, we are not commenting on this for now,” NAR spokesperson Tori Syrek told Bisnow by email. “We don’t want to be seen as putting our thumb on the scale. We keep a full list of legislation we publicly support at FLYIN.realtor.”

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