When it comes to home mortgages, President Donald Trump has a plan. And it’s a very stupid plan, one where he destabilizes the housing market by turning mortgage behemoths Fannie Mae and Freddie Mac into publicly traded stocks.
Trump’s plan is to launch an initial public offering for both Fannie and Freddie, which theoretically could raise around $30 billion. For reference, that’s only slightly more than Immigration and Customs Enforcement’s budget for next year alone. So, not exactly a windfall.
Even the people pushing this idea don’t really understand how this would work. Fannie and Freddie don’t make loans. Instead, they package loans and sell them to investors. Those loans come with an implicit guarantee that Freddie and Fannie will cover payments if the mortgage holder defaults. Removing that guarantee could raise mortgage rates because the investments become riskier to hold.
The head of the Federal Housing Finance Agency, Bill Pulte, suggested the government could retain control over Fannie and Freddie and continue the payment guarantee—yet somehow, they would also be publicly traded companies. No one has any idea how this would be accomplished, including Pulte, who didn’t offer any details on his grand plan.
While regular folks would find buying a house more expensive, the people who matter to Trump—meaning billionaire investors—would see a windfall if Fannie and Freddie were privatized. One person who is sure to benefit is Bill Ackman, who has leveraged his support for Trump into a role as a sort of de facto economic adviser, tweeting out his thoughts and feels for an audience of one. He already got Trump to put a 90-day pause on some of the worst tariffs.
Ackman has been banging the drum about privatizing the mortgage giants for months, even though they have been under government conservatorship since 2008’s financial crisis. Surely that’s not because his hedge fund holds the largest amount of existing Fannie Mae shares, worth about $1.2 billion. Ackman has held on to those shares for a decade, betting on eventual privatization—and a giant payday.