Fannie, Freddie speculation mounts on Bessent remark on sovereign wealth fund

Wall Street is weighing in on the possible fate of home loan giants Fannie Mae and Freddie Mac, after a fleeting suggestion by Treasury Secretary Scott Bessent earlier this week that the government's stakes could eventually become part of the proposed US sovereign wealth fund.

Billionaire hedge fund manager Bill Ackman, who has long sought to profit from the re-privatization of the so-called government-sponsored enterprises, endorsed the idea on social media while noting that it would have to be done in a way "respecting the shareholders' place in the hierarchy of claims."

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Stifel Financial Corp. Chief Executive Officer Ronald Kruszewski wrote in the Financial Times that transferring the government's stakes in the two entities could "bolster the financial stability of the nation" and prove lucrative for the US, paving "the way for a $1 trillion sovereign wealth fund by 2040." Mortgage bond strategists at JPMorgan Chase & Co., meanwhile, suggested investors should take the idea seriously, if cautiously.

The chatter began earlier last week when, on an episode of the "All In" podcast, Bessent was asked about President Donald Trump's recent proposal to create a sovereign wealth fund. In his answer, Bessent seemed to suggest the administration has at least looked at using the government's stakes in the two companies as assets for the fund. 

The Federal Housing Finance Agency, which oversees Fannie and Freddie, didn't respond to a request seeking comment. 

The companies were originally created by Congress to help boost homeownership by making mortgages more available. In 1968, Fannie was converted into a private company, yet Washington's implicit backstop remained. The US acquired massive stakes in the pair as part of a roughly $190 billion bailout during the financial crisis.