The White House Wants to Privatize Fannie Mae and Freddie Mac
The Trump administration is looking to Congress to remove the federal charters for Freddie Mac and Fannie Mae. The plan will release them from U.S. control during a sweep to reorganize the government.
Since 2008, the two companies have been under U.S. conservatorship. New competitors under the plan could challenge their market dominance. A government entity would oversee any rivals.
A report about the changes, which are subject to government approval, stated, “Taxpayers would be protected by virtue of the capital requirements imposed on the guarantors, maintenance of responsible loan standards, and other protections deemed appropriate by their primary regulator.”
Right after the announcement Fredie’s preferred shares went up 4 percent and Fannie’s increased 5 percent. Fannie and Freddie do not make loans. Rather, they buy loans from lenders, wrap them into securities, and provide guarantees to investors should the loans wind up in default.
Both Fannie and Freddie were taken over during the financial crisis in 2008. They were injected with $187.5 billion in bailout money, and are once again profitable, paying the government more in dividends than they received in assistance. Congress and policymakers still maintain the companies should be replaced by a system that would not leave taxpayers footing the bill for losses.
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The White House Wants to Privatize Fannie Mae and Freddie Mac
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