Treasury Secretary Steve Mnuchin told the Wall Street Journal that the Trump administration will not privatize Fannie Mae and Freddie Mac. The government effectively nationalized them in 2008 in a bid to stabilize the housing market as mortgage defaults mounted.
- Worth Noting: The companies are currently allowed to retain just $45 billion of earnings between them, and are expected to hit that limit in early 2021, which the current administration will likely increase before leaving office, the Journal noted.
- Basics: Fannie and Freddie don’t make home loans. Instead, they buy mortgages and package them into securities, which they sell to investors. Their promise to make investors whole in case of default keeps down the price of home loans and underpins the popular 30-year fixed-rate mortgage. [WSJ]