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(Bloomberg) -- The agencies that control mortgage giants Fannie Mae and Freddie Mac set out a roadmap for releasing the pair from government supervision, sending the entities’ common stock to the highest levels since 2019.
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The new guidelines released Thursday reinstate the US Treasury’s power to approve any such plan in a bid to keep the process “orderly.”
“The agreement restores Treasury’s previous right to consent to a release of the GSEs from conservatorship,” the Treasury Department and Federal Housing Finance Agency said in a joint statement. Fannie and Freddie are known as government-sponsored enterprises, or GSEs.
It will “help ensure that the eventual release of the GSEs from conservatorship will be orderly and to reflect certain existing practices,” the agencies said.
The announcement, less than three weeks before Donald Trump is scheduled to be sworn back into office as president, comes just days after hedge fund manager Bill Ackman recommended buying the entities’ common stock, sending prices soaring. He’s among the longtime holders in the entities.
But investors are betting that Trump’s reelection increased the chances of ending the conservatorship. Ackman argued that Fannie and Freddie have improved their capital positions and are poised for strong performance in a challenging housing market.
“Trump likes big deals and this would be the biggest deal in history,” Ackman wrote in a post on X.
Freddie Mac shares rose to $3.96 at 10:30 a.m. in New York Friday. Fannie Mae’s stock climbed to about $4.07.
As part of the roadmap laid out Thursday, the Treasury also committed to detailing plans for ending the conservatorship, seeking public comment and consulting with the Financial Stability Oversight Council and the US president.
A senior Biden administration official, speaking on condition of anonymity, said the new agreement wouldn’t prevent a future administration from taking action with respect to Fannie and Freddie, but it would set expectations for market participants and for Congress on how an end to the conservatorship might proceed.
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Fannie and Freddie don’t offer mortgages directly to homebuyers, but they underpin the US housing market by purchasing loans and packaging them into securities for sale to investors. The federal government took control of the companies during the 2008 financial crisis, bailing them out to the tune of about $187.5 billion.