Trump allies plan to privatise Fannie and Freddie, says report

There has been growing discussion around the future of Fannie Mae and Freddie Mac, two major mortgage-finance firms in the US, as the 2024 presidential election approaches.
According to a report by the Wall Street Journal, allies of US presidential candidate Donald Trump are considering plans to privatise these firms if Trump wins the upcoming election.
The discussions involve prominent figures close to Trump, including Larry Kudlow, the former director of the National Economic Council, and John McEntee, who previously worked in the White House.
Both have reportedly been involved in talks with bankers about ending the US government’s control over Fannie Mae and Freddie Mac. These talks suggest a significant shift in how the mortgage industry could be structured if the former president were to regain office.
At present, Fannie Mae and Freddie Mac are operated as for-profit corporations, even though they were initially created by Congress.
Their role is to expand the home lending market in the US by purchasing home loans from private lenders and turning them into mortgage-backed securities. These securities are then sold to investors, which helps keep the flow of money in the housing market.
Privatisation of these firms has been attempted before, most notably during Trump’s previous term, but none of those attempts were successful.
Under government control, Fannie and Freddie have played a crucial role in stabilising the housing market, especially after the financial crisis of 2008. As such, any plan to privatise these companies could have far-reaching effects on the economy, particularly in the housing sector.
One idea being discussed by Trump’s allies is having the US Treasury Department back part of the loans provided by Fannie and Freddie through a so-called standby guarantee. This would ensure that even though the companies would be privately owned, the US government would still be involved in backing a portion of their loans, providing a safety net for lenders and borrowers.
An important aspect of these discussions is whether or not Congress would need to approve such a move. There are talks of bypassing Congress entirely by working through the Federal Housing Finance Agency (FHFA) and the Treasury Department, which currently oversee Fannie Mae and Freddie Mac.
In terms of broader impact, the privatisation of Fannie Mae and Freddie Mac could lead to changes in the way mortgage loans are structured and priced. Without government backing, there could be an increase in mortgage interest rates, which could make homeownership more expensive for many Americans.
Additionally, private shareholders, who own stocks in Fannie and Freddie, would likely see their investments rise in value if the firms were privatised, but the risk for future investors would also increase.