Trump Reportedly Taps Wall Street Banks To Explore Fannie, Freddie Public Offering Strategy — Retail Eyes Fresh Highs

Fannie Mae and Freddie Mac stocks gained in extended trading on Thursday after a report stated that U.S. President Donald Trump is inquiring about the pitches from chief executives of big banks for monetizing the mortgage firms, including a major public offering.

According to a Bloomberg News report, Trump met with JPMorgan Chase & Co. CEO Jamie Dimon at the White House last week, followed by talks with Goldman Sachs CEO David Solomon on Thursday. The president is also likely to meet with the Bank of America CEO, Brian Moynihan, in the coming days, and talks are likely to include other banks too, the report added, citing people familiar with the matter.

Shares of Federal National Mortgage Association, or Fannie Mae, jumped 14.4% after-hours, while Federal Home Loan Mortgage Corp, or Freddie Mac, shares rose 5.7%. Retail sentiment on Stocktwits for both stocks was ‘extremely bullish’ late Thursday.

Fannie and Freddie buy mortgages from lenders and either hold these mortgages in their portfolios or package the loans into mortgage-backed securities, with a guarantee of protection from the government regarding any losses.

Trump is reportedly asking bank CEOs for a roadmap on taking the mortgage firms public and how their banks might play a role. The federal government gained control of the two companies following the 2008 financial crisis. Both companies are now profitable, and only a limited number of their shares are publicly available.

The Republican President had said in May that he was “giving very serious consideration” to taking the firms public, which is also a long-term demand for allies and hedge funds, including billionaire Bill Ackman. However, the government has been cautious about making any moves due to a potential impact on the housing market.

One retail trader expected Fannie Mae stock to hit $15 by Friday.

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Another trader noted that some estimates of the companies' value were “super light” before adding, “These companies will trade at AT LEAST 12x PE. So many changes [are] being made in the businesses for efficiency.”

According to a report by the Congressional Budget Office, the government could generate $206 billion from the sale of the two companies, provided they are under receivership.

Freddie Mac shares have gained nearly 92% this year, while Fannie Mae stock has more than doubled.

Also See: Cigna Stock Slides 8% On Thursday But Wells Fargo Analyst Is Surprised: Here’s What Happened

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