According to a new report from The Wall Street Journal, talks about privatization have been taking place since the spring, with close aides to President Trump Larry Kudlow and John McEntee also taking part in the discussions.
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Former members of the Trump administration and banking industry officials are working on a plan to free Fannie Mae and Freddie Mac from federal control, it was reported Friday. of The Wall Street Journal.
Discussions on the issue have been taking place since at least the spring. of journal ReportedThe report, citing anonymous sources, said former National Economic Council Chairman Larry Kudlow and former White House personnel director John McEntee were also in the talks. It was not reported who else from the banking industry was involved in the talks.
Fannie Mae and Freddie Mac were placed under government conservatorship in 2008 as potential losses from the subprime mortgage collapse mounted. The companies are still in discussions about how to operate going forward after paying back the $191 billion in bailout money plus interest provided by taxpayers during the housing crisis.
As president, Donald Trump began the process of “recapitalizing” the companies. But after Trump lost the 2020 election, Democrats blocked his plans to privatize Fannie Mae and Freddie Mac, leading to an exodus of executives from the companies. Still, privatizing Fannie Mae and Freddie Mac remains a priority for some conservatives.
The talks are reportedly exploring a range of options, including using the Federal Housing Finance Agency to circumvent Congress. Another option is to use the Treasury Department to partially buy up Fannie Mae and Freddie Mac’s loans. of Journal The report also said one of the priorities in discussions between bankers and former Trump administration officials is to ensure that Fannie Mae and Freddie Mac are adequately capitalized so as not to threaten the housing market.
As of June 30, Fannie and Freddie had combined net assets of $139.7 billion, up 11% from $125.4 billion at the beginning of the year. Former Freddie Mac CEO Donald Layton estimates that Fannie and Freddie could be considered recapitalized when their combined net assets reach $150 billion.
But the exact amount needed will depend on how the mortgage giants are structured when they are released from protection and how much support the government provides.
Vice President Kamala Harris, Trump’s opponent in the November presidential election, argued during a campaign event last month that privatizing Fannie Mae and Freddie Mac could increase interest costs on a typical U.S. mortgage by $1,200 a year.
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