Financial institutions on Wall Street are competing fiercely to secure the endorsement of the Trump administration for a massive Initial Public Offering (IPO) involving Fannie Mae and Freddie Mac.
The Trump administration is reportedly exploring an initial public offering (IPO) for government-sponsored enterprises Fannie Mae and Freddie Mac by the end of 2025. The aim is to sell between 5% and 15% of shares, which could raise around $30 billion and value the companies at over $500 billion combined.
However, experts consider the timeline to be extraordinarily aggressive and highly uncertain due to legal, operational, and conservatorship issues that remain unresolved. The two entities have been under federal conservatorship since 2008 and operate with a government backstop. Shares currently trade over the counter, not on major exchanges.
President Trump has met with several top U.S. bank CEOs, including JPMorgan Chase, Goldman Sachs, Bank of America, and Citigroup, to discuss monetization and IPO plans for the Government Sponsored Enterprises (GSEs). It's unclear whether the IPO would be for both entities combined or two separate offerings, and whether they would remain under conservatorship after the IPO.
Industry experts caution that completing an IPO this year is unlikely without resolving significant legal and investor protection challenges. Fannie Mae and Freddie Mac play a key role in the mortgage market by providing liquidity to lenders and guaranteeing many of the mortgages in the U.S.
The housing affordability crisis is a focus for the Trump administration, according to Treasury Secretary Scott Bessent. The administration is focused on getting a return on its investments in Fannie and Freddie, rather than on raising capital for the entities. Bessent stated that the administration will look to balance a return for taxpayers with keeping mortgages affordable.
Fannie Mae and Freddie Mac were created under congressional charters and operated as private companies until the 2007-08 financial crisis that threatened their solvency, prompting a federal bailout of $191 billion. Since then, Fannie and Freddie have returned to profitability and have paid dividends totaling over $301 billion to the Treasury as of July 2020.
The deal for the IPO of Fannie Mae and Freddie Mac is expected to happen in the fall or winter of 2025. Several Wall Street banks are pitching President Donald Trump about handling the IPO, with JPMorgan and Goldman Sachs also wanting the business for the IPO of Fannie Mae and Freddie Mac.
The initial sale of the government's stake in Fannie Mae and Freddie Mac could be upward of $30 billion or more, roughly the size of the IPO of Saudi Aramco. Fannie and Freddie purchase mortgages from lenders and either hold them within their portfolios or bundle those loans into mortgage-backed securities (MBS) that can be sold to investors.
The Trump administration's plans for an IPO by the end of 2025 are actively being considered, involving top-tier banks. However, the actual execution remains uncertain and faces notable hurdles.
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