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Citigroup (C) CEO Jane Fraser and Bank of America (BAC) CEO Brian Moynihan met with President Trump on Wednesday to discuss how to relinquish the government’s grip over two housing giants, Fannie Mae and Freddie Mac, according to people familiar with the matter.
The president has been inviting the chiefs of big Wall Street banks one by one recently to discuss what such a deal could look like, which would include an initial public offering (IPO), Bloomberg first reported last Thursday. JPMorgan Chase CEO Jamie Dimon and Goldman Sachs CEO David Solomon also met with Trump for such discussions last week.
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Some of these discussions have revolved around how the banks value these organizations, how they think they could sell them, and how this wider privatization effort could be structured, according to one person familiar with the matter.
The over-the-counter shares of Freddie Mac (FMCC) and Fannie Mae (FNMA) both fell more than 3% Wednesday. They are up 101% and 147%, respectively, year to date.
Spokespeople for the banks declined to comment.
Fannie and Freddie play integral roles in the US housing market by purchasing mortgages and repackaging them as securities. Both fell under government conservatorship during the 2008 financial crisis when mortgage defaults soared and the US Treasury Department injected over $180 billion into the mortgage lenders.
A combined stock offering of these two mortgage giants could mean one of the world’s largest public deals, which would result in a major payday for the stock underwriting desks of these big banks. The president vowed in late May to take the mortgage giants public in a post on Truth Social.
However, pulling off such a move would be far from a simple feat.
The challenge with relinquishing the government’s conservatorship of Fannie and Freddie is that turning these massive institutions into private businesses could drastically impact access to affordable credit in the housing market, which has steadily relied on these institutions to fund 30-year mortgages for over a decade.
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For these reasons, Democratic politicians, civil rights organizations, and some housing experts have been critical of the effort.
“This could mean stricter lending requirements, higher interest rates, and even higher guarantee fees to reflect greater risk. This could mean higher costs for credit unions to sell these loans,” Kelsey Nelson, federal regulatory compliance counsel for the credit union advocacy group America’s Credit Unions, wrote in June.
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