Fannie Mae and Freddie Mac Shares Surge as Trump Explores Sale

Is it time to fully privatize both quasi-governmental mortgage agencies?

President Donald Trump is exploring the sale of the government-controlled mortgage giants Fannie Mae and Freddie Mac, institutions which back about half of the $16 trillion US mortgage market. Both are systemically significant, politically sensitive and persistently controversial. The proposed privatization, while likely requiring Congressional approval, could significantly reshape the housing market. 

For new investors, these names may not mean anything. For most more experienced hands, names like Fannie Mae and Freddie Mac have been collecting dust on the shelves for over a decade. So it’s as good a time as ever to review their history. Meanwhile their share prices – FNMA and FMCC, respectively – have surged over 51% and 38% this week alone. 

Fannie Mae (FNMA) Daily Chart: April 2024 to May 2025 

The Government-Sponsored Era: Built for Liquidity 

Fannie Mae was created in 1938 during the Great Depression to provide liquidity to the mortgage market, a public-sector response to a housing credit collapse. Freddie Mac followed in 1970, essentially as a competitor, ensuring liquidity and reducing concentration of risk. 

But here’s the nuance: By the late 1960s, the US was dealing with fiscal pressure, the Vietnam War and Great Society programs, and it needed to remove Fannie’s obligations from the federal balance sheet. That’s when the first real privatization happened. 

In 1968, Fannie Mae was spun into a shareholder-owned, publicly traded company, with the government keeping its ties through a congressional charter. Freddie Mac underwent a similar transformation in 1989, moving under shareholder ownership but maintaining its quasi-governmental status. 

The illusion of privatization 

Now, Wall Street loved these entities. They had an implied federal guarantee and could borrow at lower rates. Lenders loved them even more. They could originate a loan, sell it off to a GSE and recycle capital. The privatization was never clean. This was always a kind of hybrid model: private profits, public risk. 

They were known as Government-Sponsored Enterprises (GSEs) and operated as state-backed private companies with extraordinary market reach and benefits, including lighter regulatory treatment and tax exemptions. 

Freddie Mac (FMCC) Daily Chart: April 2024 to May 2025 

2008: The Crash That Exposed the Model 

When the housing market imploded in 2008, so did the illusion. Both companies were massively overleveraged and undercapitalized. Losses on subprime and Alt-A mortgages left them insolvent. 

The federal government stepped in, placing both into conservatorship under the Federal Housing Finance Agency (FHFA) and injecting $191 billion in bailout capital. For all intents and purposes, they were now government-controlled entities, but still operating in limbo, neither fully public nor private. 

Post-crisis tug-of-war 

Since then, we’ve been stuck in a policy purgatory. Multiple administrations, from Obama to Biden, have looked at exit ramps, wind-downs, recaps, releases. The first Trump administration likewise made an effort to end the conservatorship, but nothing materialized. Courts, Congress and capital markets have all posed obstacles. 

Why? Because it’s not just about ideology. It’s about market stability and housing affordability. The GSEs are deeply embedded in everything from 30-year fixed mortgages to MBS issuance to affordable housing mandates. 

2025: Reprivatization returns to the fore 

Now in 2025, with Trump back in the White House, there’s renewed talk about privatizing Fannie and Freddie. The market should take this seriously, not because it’ll happen tomorrow but because even the prospect introduces volatility into MBS spreads, housing policy and credit availability. 

It’s also going to raise questions: 

• What does privatization mean in practice? 
• How do we price risk if the government backstop goes away? 
• Who steps in to ensure affordable 30-year fixed-rate mortgages if the GSEs pull back? 
• What would a restructuring of the mortgage market mean for US homebuilders? 
  

Bottom Line 

From a market structure standpoint, Fannie and Freddie represent the most consequential unresolved reform of the post-Global Financial Crisis era. Any move toward privatization isn’t just about political will, it’s about systemic risk, investor confidence and access to credit in the world’s largest housing market. 

This isn’t just a policy footnote. It’s a core macro issue, and markets will notice. 

Has President Trump addressed one of the key issues regarding privatization? In a Truth Social post on Wednesday, May 28, the president reiterated his desire to bring Fannie Mae and Freddie Mac public while drawing particular attention to the U.S. government's role as their unofficial backstop. If the U.S. government remains as the implicit guarantor of last resort, then it's more of the same: privatized gains, socialized losses.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx
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