- Fannie Mae and Freddie Mac have surged amid speculation Trump could privatize the mortgage giants.
- The 2008 financial crisis led to the government’s conservatorship of the firms.
- Reprivatization efforts could take years, but investors are already placing bets.
An overlooked corner of the Trump trade remains in full swing this year.
The preferred shares of Fannie Mae and Freddie Mac, the mortgage finance giants that entered a government conservatorship during the 2008 financial crisis, have soared this year.
Shares of Fannie Mae and Freddie Mac were up 121% and 99%, respectively, year to date as of Tuesday.
The gains are even bigger since Trump’s election win in November, with the two stocks up more than 420%, and the gains accelerated on Wednesday, with shares of Fannie Mae and Freddie Mac up another 4%.
Both stocks are trading at levels not seen since the spiraling crash of the 2008 financial crisis, as investors bet that the Trump administration could re-privatize the two government-sponsored entities.
Fannie and Freddie, which buy mortgages and package them into bonds to sell to investors, are a crucial source of liquidity for the mortgage market and allow lenders to keep making new loans.
In 2008, the US government bailed out both companies and took them over as the housing crash accelerated and the financial position of the mortgage finance companies deteriorated.
Since then, excess profits generated by both companies have been paid to the US Treasury rather than their investors, which is why the preferred shares of both Freddie Mac and Fannie Mae have traded at least 90% below their record highs for much of the past 15 years.
Bloomberg Intelligence analysts said re-privatizing the companies would be a long process that “at best” would not occur until 2026 or 2027.
But the market is already latching onto the idea, and one investor who is benefiting is hedge fund billionaire Bill Ackman.
Ackman said late last year that he’s been holding both Fannie Mae and Freddie Mac stocks for a decade. He’s finally starting to see a profit.
Last month, the hedge fund boss delivered a 104-page buy pitch on Fannie Mae and Freddie Mac via X, arguing that ending the government conservatorship would be “consistent with mandate to simplify the government (i.e. DOGE).”
Those against the plan worry that the privatization of Freddie Mac and Fannie Mae would result in higher mortgage rates and a resurgence in risky behavior that led to the 2008 crisis, while supporters say the companies are well-capitalized and in a much stronger financial position than they were in the years leading up to the 2008 Financial Crisis.
