Fannie Mae and Freddie Mac Stocks Surge on Speculation of Privatization Revival

Shares in mortgage giants Fannie Mae and Freddie Mac experienced a significant surge on Wednesday amid speculation that Donald Trump’s potential return to the White House and a Republican-controlled Congress could reignite efforts to privatize the companies.

A Look Back: Conservatorship and Early Privatization Efforts

Fannie Mae and Freddie Mac have been under government conservatorship since 2008, following the financial turmoil caused by the Great Recession. During his first term, Trump initiated the “recapitalization” of the companies, laying the groundwork for their eventual privatization. However, these efforts were halted when Democrats took control after the 2020 election.

The privatization of Fannie and Freddie has remained a contentious topic, with advocates arguing it could restore the companies’ independence and critics cautioning against potential risks to the housing market.

Recent Developments Fuel Optimism

According to a September report from The Wall Street Journal, former Trump administration officials and key figures in the banking industry have been working quietly to restart the privatization process. With the GOP reclaiming control of the Senate on Tuesday, the possibility of fast-tracking privatization has gained traction, though control of the House of Representatives remains undecided.

The Associated Press reported that several House races remain too close to call, leaving the full extent of Republican influence uncertain. A Republican majority in both chambers of Congress would provide a clearer pathway for advancing privatization legislation.

Market Reaction

Investors responded enthusiastically to the news:

• Preferred shares of Fannie Mae and Freddie Mac, which have traded over the counter since being delisted in 2010, soared by more than 70% on Wednesday.
• Common stock prices for both companies climbed nearly 40%.

The market activity underscores growing investor confidence that privatization could become a priority under a Trump administration and Republican-controlled Congress.

What’s Next?

While political uncertainty persists, the surge in Fannie and Freddie shares reflects renewed interest in their privatization prospects. The housing finance landscape could undergo significant changes depending on the outcome of ongoing congressional races and future policy decisions.