Under the Radar Trump Trade Rises on Hopes of Major Government Shakeup

• Freddie Mac and Fannie Mae shares rose 74 percent and 70 percent, respectively, after Trump’s election victory.
• Trump’s second presidency could end government control of institutions and reshape the mortgage industry.
• Some of Trump’s hedge fund backers are poised to benefit from privatization.

While Tesla and Bitcoin rose after Donald Trump’s election victory, shares of two companies tied to an important corner of the US economy also rose due to the potential for a major shakeup.

preferred shares Freddie Mac And Fannie MaeMortgage finance giants, which came under state protection during the 2008 financial crisis, were on the rise last week. Since Trump won the election, shares of Freddie Mac and Fannie Mae are up 74% and 70%, respectively.

Behind these massive gains are hopes that Trump’s second presidency could free both companies from government conservatorship and potentially reshape the US mortgage industry.

“The re-election of former President Donald Trump is reinvigorating efforts to remove Fannie Mae and Freddie Mac from government conservatorships,” Bloomberg Intelligence analyst Ben Elliott wrote in a recent note.

In 2008, the U.S. government bailed out and took over both companies to prevent the housing market from crashing and ensure mortgages were still available to potential home buyers.

Although the companies do not originate mortgages, they purchase home loans from lenders and securitize them, providing liquidity to a market dealing with a relatively illiquid product.

Since then, excess profits made by both companies have been paid to the US Treasury rather than to their investors; That’s why both Freddie Mac and Fannie Mae’s preferred shares have traded below $5 for most of the last 15 years.

However, a recent The Wall Street Journal reports It suggests that members of Trump’s inner circle, such as Larry Kudlow and John McEntee, discussed plans to reprivatize the two companies.

Opponents of the plan argue that the privatization of Freddie Mac and Fannie Mae higher mortgage rates While a resurgence in risky behavior led to the 2008 crisis, supporters say companies are well capitalized and in a much stronger financial position than they were during the 2008 Financial Crisis.

John Paulson, the hedge fund magnate and potential candidate for Treasury Secretary in the Trump administration, is among the major holders of Fannie and Freddie shares that would benefit from privatization.

While Trump’s second presidency could seek to advance plans to privatize mortgage finance giants, efforts to do so during his first administration failed.

Bloomberg Intelligence analysts said privatizing the companies would be a long process and “at best” wouldn’t happen until 2026 or 2027.