Trump deals blow to Fannie, Freddie privatization hopes. But there are other options that could lift the stocks.

By Steve Goldstein

Both Fannie and Freddie shares have doubled over the last year

Fannie Mae is now unlikely to be privatized. But hope is not lost for investors in the stock, according to an analyst.

The directive of President Donald Trump for government-backed mortgage giants Fannie Mae and Freddie Mac to buy $200 billion worth of mortgage securities would seemingly spell the end to the idea that the giants would go public again in massive initial public offerings.

Trump's social-media post implicitly suggested he wants to keep the pair under the conservatorship they've been in since the global financial crisis of 2008-09.

"Because I chose not to sell Fannie Mae and Freddie Mac in my First Term, a truly great decision, and against the advice of the 'experts' it is now worth many times that amount - AN ABSOLUTE FORTUNE - and has $200 BILLION DOLLARS IN CASH. Because of this, I am instructing my Representatives to BUY $200 BILLION DOLLARS IN MORTGAGE BONDS," he wrote.

Evercore ISI analysts led by Matthew Aks said it's too early to give up on the idea that the stocks will rise in value. They acknowledged that conservatorship is now unlikely to end, but said other policies could boost the stocks, both of which have doubled over the last 52 weeks.

Fannie Mae (FNMA) has a market cap of about $13 billion. Freddie Mac (FMCC) is worth about $7 billion.

"Trump could still at some point opt to (1) forgive the government's senior preferred stake in the entities, deeming it repaid based on capital returned to the government under the controversial net worth sweep; and (2) re-list the entities on the [New York Stock Exchange]," the analysts said.

The actions would lead to a significant appreciation in the book value of the equity held by private shareholders and create a more liquid market for the entities' common stock - both of which trade on the over-the-counter market - without causing any real disruption to the government-sponsored enterprises' operations or the housing market, the analysts said.

Doing so would move the GSEs closer to privatization and allow Trump to claim progress on the issue.

The analysts conceded that Trump has other issues he is tackling, including housing. "There would also be some who say that deeming the senior preferred stock repaid gives a windfall to private shareholders at the expense of the taxpayer. But we don't think Trump would be particularly bothered by this, and he would certainly have ways to respond, including by underscoring that this was a necessary first step to unlocking long-term value for the taxpayer," the analysts said.

-Steve Goldstein

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01-09-26 0747ET