Economist Peter Schiff is pushing back against President Donald Trump’s plans for an initial public offering for Fannie Mae or the Federal National Mortgage Association (OTC:FNMA) and the Federal Home Loan Mortgage Corp. (OTC:FMCC), also known as Freddie Mac.
Freddie And Fannie’s IPO A ‘Bad Idea’
On Monday, in a post on X, Schiff criticized plans to take the two government-sponsored enterprises public without releasing them from conservatorship.
“Trump intends to keep Fannie and Freddie in conservatorship, yet do the IPO anyway,” Schiff wrote, adding that the sole purpose of the public offering was to release the GSEs from their government conservatorship, which has lasted for nearly two decades.
See Also: Buy Now Pay Later Can Torpedo Mortgage Chances
The U.S. government has placed Freddie and Fannie under conservatorship since 2008, during the Great Financial Crisis, and while there have been several attempts over the years to bring an end to this, Schiff argued that the current proposal lacks any real reform intent.
“The sole purpose of this bad idea is to reward Trump’s friends who can sell their shares,” Schiff said, likely alluding to hedge fund billionaire Bill Ackman, a prominent Trump ally whose firm, Pershing Square Holdings, holds a major stake in the two GSEs and has been actively lobbying for an end to their federal conservatorship.
Ackman Supports Freddie And Fannie Merger, Schiff Pushes Back
Recently, Ackman also supported Trump’s idea for a unified listing of the two mortgage finance giants, under the ticker symbol “MAGA.”
According to Ackman, the merger and its resulting cost and operational synergies can help bring down the mortgage rates for homebuyers. “A merger would also reduce the cost and risks of government oversight as there would be only one institution that would require FHFA oversight,” he said, in a post on X.
Schiff was against this as well, noting that such a merger could result in a “moral hazard,” that was far greater than what existed before the Great Financial Crisis in 2008.
He expressed concerns that such a move could spark a monopoly in the market, resulting in a high concentration of risk, far worse than the duopoly that existed prior to the crisis.
Shares of Fannie Mae and Freddie Mac were 2.87% and 2.89%, trading at $11.12 and $9.97 per share, respectively, ahead of major decisions regarding their fates by the U.S. government.
Image via Shutterstock/ Tada Images
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