President-elect Trump’s administration will privatize the bailed-out institutions Fannie Mae and Freddie Mac, Trump’s choice to lead the Treasury Department said Wednesday morning.
Appearing on Fox Business, the expected nominee, Steven Mnuchin, said privatizing the two government-sponsored enterprises will be a top priority for the administration.
“We gotta get Fannie and Freddie out of government ownership,” Mnuchin said. “It makes no sense that these are owned by the government and have been controlled by the government for as long as they have.”
Fannie and Freddie, dominant in the secondary mortgage markets, have been in government control since the housing crisis in 2008.
Previously, Trump’s stance on the two companies had not been clear. Fannie and Freddie shareholders, however, were hopeful of a privatization move because some major investors in the two companies were involved early in his campaign.
Now it appears that Trump’s policy will be to release Fannie and Freddie into the private sector, a measure that the Obama administration and bipartisan members of Congress have blocked. Shares in the companies, which are traded off-exchange, soared Wednesday following the news.
“We need these entities that will be safe,” Mnuchin said, explaining that Fannie and Freddie displace private lending. “So let me just be clear: We’ll make sure that when they’re restructured, they’re absolutely safe and they don’t get taken over again. But we gotta get them out of government control.”
That effort will run counter to the wishes of some congressional Republicans, who will have some say in the near-term fate of Fannie and Freddie.
Sen. Bob Corker, R-Tenn., has opposed reprivatization of the two companies. Last year, he was successful in getting a bill passed that will block Treasury from selling its senior preferred shares in Fannie and Freddie for two years.
Investors have lobbied the administration to allow Fannie and Freddie to retain earnings and rebuild capital. Since 2012, the Treasury has swept up all their profits, an arrangement that investors have sued to stop.
