Fannie, Freddie surge as Trump taps advisors who back privatization
3:51 pm ET November 10, 2016 (MarketWatch)
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By Andrea Riquier
Will the Trump administration undo the 2012 sweep of profits to the Treasury?
Shares of Fannie Mae and Freddie Mac have rallied this week as President-elect Donald Trump surrounds himself with advisors seen as sympathetic to shareholders of the two mortgage companies.
Shares of Fannie are up about 41% since Tuesday, and Freddie shares have risen about 46% in that time.
Fannie (FNMA) and Freddie (FMCC) were placed into federal conservatorship during the 2008 financial crisis, and in 2012 the Obama administration amended the terms of the 2008 agreement to sweep quarterly profits from the two enterprises, a move that's been challenged in court by shareholders.
Ken Blackwell, who's been tapped to lead the domestic transition team, wrote an op-ed (http://thehill.com/blogs/congress-blog/economy-budget/207937-treasury-stealing-from-fannie-and-freddie-shareholders) in 2014 in which he called the Treasury arrangement "theft of private property." In the piece, Blackwell noted that there is a "bipartisan consensus on how to wind down Fannie and Freddie."
On Wednesday, the Wall Street Journal reported (http://www.wsj.com/articles/donald-trumps-financial-advisory-team-stocked-with-wall-streeters-1478730578?mod=djemMoneyBeat_us) that hedge fund investor John Paulson had been tapped to be a Trump advisor because of his understanding of the housing market. Paulson is known (https://www.amazon.com/Greatest-Trade-Ever-Behind-Scenes/dp/0385529945/ref=sr_1_1?ie=UTF8&qid=1478808291&sr=8-1&keywords=the+greatest+trade+ever) for shorting the subprime mortgage market as the housing bubble inflated a decade ago.
Paulson's company has donated extensively (http://www.wsj.com/articles/bets-on-fannie-and-freddie-get-help-from-lobbyists-1463087581) to nonprofits and lobbyists advocating for the release of the enterprises from government controls, according to an earlier Journal article.
Other Trump advisors have a less explicit stake in ending conservatorship, but are likely to be sympathetic to the shareholder interests. Steven Mnuchin, a Goldman Sachs veteran who's reportedly on the short list (http://www.marketwatch.com/story/gingrich-palin-among-possible-trump-cabinet-picks-obamacare-defenders-vow-total-war-2016-11-10) to be Treasury secretary, serves on the board (https://searsholdings.com/invest/corporate-governance/board-of-directors) of directors of Sears Holdings(SHLD) with Bruce Berkowitz, CIO of Fairholme Capital Management, one of the firms leading the shareholder lawsuits (http://www.marketwatch.com/story/what-one-big-fund-is-saying-about-fannie-freddie-2014-03-10).
-Andrea Riquier; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
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