"Two Houses" rose over 15%! Report: Trump promotes the privatization of Freddie Mac and Fannie Mae, gathering Wall Street executives for advice

The U.S. government's nearly two-decade takeover of mortgage giants Freddie Mac and Fannie Mae may be approaching a turning point.

According to media reports on August 1, President Trump is actively promoting the privatization of these two companies and has begun soliciting opinions from top Wall Street bank executives, exploring ways for the government to exit through large-scale public stock offerings. This move could lead to one of the largest IPOs in history and ultimately resolve a significant legacy issue from the "post-crisis era."

According to informed sources, Trump met with JP Morgan CEO Jamie Dimon at the White House last week and plans to meet with Goldman Sachs' David Solomon and Bank of America's Brian Moynihan among other bankers. The core topic of discussion is to ask these banks for specific proposals on how to monetize the "two GSEs" and reintroduce them to the public market.

For Wall Street, this not only signifies a potential massive underwriting business but also marks a tangible action by the Trump administration to address this long-standing dilemma that has troubled Washington policymakers. Following the announcement, Freddie Mac's stock price rose 15% in the over-the-counter (OTC) market, while Fannie Mae increased by 5.7%.

Wall Street Executives Invited to Propose Monetization of the "Two GSEs"

Freddie Mac (full name: Federal National Mortgage Association) and Fannie Mae (full name: Federal Home Loan Mortgage Corporation) are the two pillars of the U.S. housing finance system. Since the outbreak of the 2008 financial crisis, these so-called "government-sponsored enterprises" have been under government conservatorship to prevent systemic risk from spreading.

For years, how to reform the U.S. housing finance system and release the "two GSEs" from government control has been an unresolved issue in Congress. Efforts at reform have repeatedly stalled due to concerns about potential impacts on mortgage costs and affordable housing financing.

According to media reports citing several informed sources, Trump is meeting one-on-one with the CEOs of major banks at the White House, directly soliciting their strategic advice on privatizing the "two GSEs" and the roles each bank would like to play in the process.

In addition to the already met JP Morgan and planned meetings with Goldman Sachs and Bank of America, there are reports that Wells Fargo is also involved in the government's consultations. Trump publicly stated in May that he is "seriously considering taking Freddie Mac and Fannie Mae public." The White House has not commented on the president's private meetings, and spokespeople for the relevant banks declined to comment or did not respond.

The Path Ahead Remains Complex

Pushing for the privatization of the "two GSEs" could mean significant economic benefits for the government, banks, and existing shareholders. Analysts point out that given the enormous scale of the "two GSEs," their public offering could become one of the largest IPOs in history, which would bring substantial underwriting fees to the selected underwriting banks For hedge funds and other investors who have long called for the government to release the "two housing enterprises," this is more likely to be an "unexpected windfall." Currently, the government holds the vast majority of shares in the "two housing enterprises," with only a small portion of the stocks publicly traded in the market.

According to a report released last week by the Congressional Budget Office (CBO), selling the government-held shares of the "two housing enterprises" has mixed implications for the government from an accounting perspective. The report estimates that if these two companies were placed under bankruptcy management, the government's holdings could yield $206 billion in returns.

Although the White House has shown clear intentions, any privatization plan must address many complex details. Key issues that remain unclear include: what proportion of shares the government will sell in the initial public offering; and how to handle the rights of existing shareholders of circulating stocks.

Informed sources say that Trump hopes bankers will provide professional insights on these complex issues. This means that, although the direction is clear, the finalization of the plan will still require multiple negotiations and careful design, and the market will closely monitor subsequent developments