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Trump is asking chief executive officers for their pitches on monetizing mortgage giants Fannie Mae (FNMA, FNMAS, FNMAO, FNMAL) and Freddie Mac (FMCC), including a major public offering of stock, according to people familiar with the matter.
Last week, Trump invited JPMorgan Chase & Co. (JPM) CEO Jamie Dimon to meet him at the White House. Goldman Sachs Group Inc. CEO David Solomon was set to meet with Trump on Thursday afternoon, and Bank of America Corp. CEO Brian Moynihan is also expected to meet the president in coming days. Talks are likely to include other banks as well, the people said.
Officially named the Federal National Mortgage Association and Federal Home Loan Mortgage Corp., the two entities are massive financial organs of the US housing system. The companies have been under government conservatorship since the 2008 financial crisis. Fannie and Freddie have both returned to steady profitability, with earnings being retained.
Trump said in May that he's giving 'very serious consideration to bringing Fannie Mae and Freddie Mac public.' Small portions of the stock already trade publicly, but a vast majority of the firms' shares are held by the government.
After Bloomberg reported on the talks with bankers, shares of both companies rose in extended trading on light volume as of 4:30 p.m. in New York, with Fannie Mae climbing 14% and Freddie Mac advancing 5.7%.
Policymakers in Washington have struggled for years with what to do with the so-called government-sponsored enterprises — one of the last loose ends from the crisis era. Efforts to overhaul the US housing finance system and release the mortgage giants from government control have repeatedly foundered in Congress amid concerns about the potential impact on mortgage costs and the companies' role in financing affordable housing.
The nonpartisan Congressional Budget Office released a report last week finding that the sale of Fannie and Freddie would be a mixed bag for the government, at least in terms of accounting. The government could make $206 billion from its stake in the companies, the CBO said, but only if they were put in receivership.
Hedge funds and other investors have long called for the US to release the pair from conservatorship, which could provide a windfall for shareholders. Analysts have said it could be one of the biggest public offerings ever — meaning it would probably offer hefty fees for the banks picked to lead it.
Many complex details would have to be worked out for any such plan, including what stake would initially be offered in any sale, and how investors who hold existing shares would be treated.
Trump is asking the CEOs to offer their ideas on the strategy for taking the organizations public and how their banks might play a role, the people said, asking not to be identified discussing private information. The administration also has conferred with Wells Fargo & Co. as it speaks with lenders, one person said.
A spokesperson for the White House had no immediate comment. White House Press Secretary Karoline Leavitt, asked earlier Thursday about Trump's meeting with Solomon, declined to detail the purpose. 'I won't discuss the president's private meetings from this podium,' she said.
Spokespeople for the banks declined to comment or didn't respond to messages.
—With assistance from Yizhu Wang, Patrick Clark and Katy O'Donnell.
(Updates with Wells Fargo in 11th paragraph.)
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