Donald Trump says he's "seriously considering" taking Fannie Mae and Freddie Mac public. And honestly? It's about time someone addressed this bizarre financial hostage situation that's been dragging on since the flip-phone era.
I've been watching the Fannie-Freddie saga unfold since the financial crisis, and there's simply nothing else like it in American corporate history. These mortgage giants have been trapped in "conservatorship" since September 2008—a supposedly temporary emergency arrangement that's now lasted longer than most dogs. Not quite public, not quite private, but definitely weird.
The conservatorship was meant to be a weekend fix. It's now old enough to have a learner's permit.
Here's the thing that's always struck me as particularly outrageous: These companies have been cash machines for years. Just absolute profit factories pumping billions—hundreds of billions, actually—directly into Treasury coffers thanks to the infamous "net worth sweep" of 2012. That's when the government essentially said, "Remember our deal where we get a 10% dividend? We've changed our minds. We're taking everything now."
(Shareholders, as you might imagine, were less than thrilled.)
So what's Trump actually proposing? From what I can gather, he wants to finally end this regulatory purgatory by allowing Fannie and Freddie to recapitalize and return to public markets as independent companies. This would be—and I'm not exaggerating here—a fundamental restructuring of the system that underwrites most American mortgages.
The model seems straightforward enough: End government control, let them build capital again, and eventually release them as regulated but private enterprises. This has been the conservative dream for years—shrink government's role in mortgage markets while maintaining some oversight.
But lord, the implications are massive. We're talking about entities that support a $7 trillion mortgage market. They're the reason 30-year fixed-rate mortgages—that uniquely American financial product—exist at scale. Any major change could ripple through the housing system in ways nobody can fully predict.
Then there's the money question. Who gets what? Preferred and common shareholders have been fighting in courts for years, arguing the profit sweep was unconstitutional. Some hedge funds—Pershing Square, Paulson & Co.—bought in after the crisis for pennies, betting on exactly this outcome. If Trump follows through, they're looking at potentially enormous windfalls.
Would this be the first time Trump administration policies benefited wealthy investors? Um, no. But the politics are fascinating nonetheless. Trump positioning himself as the problem-solver for an issue that three previous administrations (including his own first term!) couldn't crack.
The timing makes sense politically. Housing affordability ranks near the top of economic concerns for voters heading into 2024. Whether privatizing these entities would help or hurt affordability... well, that's complicated. Depends entirely on how it's implemented. But Trump clearly sees advantage in being the housing action guy.
Look, conventional wisdom has long held that Fannie and Freddie would remain in limbo forever because the status quo was too convenient—Treasury gets the cash, Congress avoids tough decisions, mortgages keep flowing. Trump's announcement suggests that calculus might finally be changing.
But—and this is crucial—the technical challenges are enormous. How much capital would they need? What regulatory framework would govern them? Would they retain an implicit government guarantee? Would affordable housing mandates stay intact? These aren't minor details; they're trillion-dollar questions that can't be answered in a social media post.
Having covered housing finance for years, I've watched smart people struggle with these questions without reaching consensus. The devil's in the details, and there are enough details here to keep Satan busy for decades.
Still... after 15 years of this weird half-existence, it seems Fannie and Freddie might finally see daylight. If nothing else, it reminds us that even the most entrenched, dysfunctional arrangements can eventually change.
The mortgage giants might finally leave their gilded cage. Though I suspect the government will negotiate generous visitation rights to see its favorite cash cows.
