From the Washingtonians for Public Banking: This effects not just the banks, but the housing market too, coming up on the 18th year of the 18-year housing cycle.
The Trump administration wants to sell the federal government’s shares in the government-sponsored enterprises Fannie Mae and Freddie Mac. The mortgage giants provide both stability and liquidity to the housing market by purchasing mortgages and packaging them as securities to private investors. During the 2008 global financial crisis, the federal government put Fannie Mae and Freddie Mac under conservatorship after injecting nearly $200 billion, the largest bailout in American history, into them. Now, the Trump administration wants to end the conservatorship and re-privatize the firms. In recent weeks, the administration has met with major bank CEOs, including JPMorgan’s Jamie Dimon, Goldman Sachs’ David Solomon, and Bank of America’s Brian Moynihan, to discuss the parameters of the initial public offering. An attempt to sell the government’s ownership in Fannie Mae and Freddie Mac could upset the housing market. It is estimated that privatizing the firms could cost America homeowners an additional $1,800 to $2,800 in annual mortgage payments. Furthermore, the lack of direct government oversight means that the two institutions could become more susceptible to another housing bubble, which led to the need to put them under conservatorship in the first place.