From Fairholme Capital on Fannie Mae and Freddie Mac
In his most recent Financial Times column, Tom Braithwaite suggests that President-elect Trump may have “the motivation to engineer IPOs of the mortgage companies.”
The article highlights that “Fannie and Freddie are being starved of capital under the current regime,” and that “a quicker remedy” to establish an adequate capital buffer at each company beyond permitting them to retain earnings “would be to sell new equity to institutional investors.”
Braithwaite concludes that “in a dream privatization, the Treasury would exchange its warrants for 80 per cent of the shares and then sell them to the public, much as it did in AIG, for a price tag that could reach $200 billion.”
Such a massive “war chest,” he notes, “could help fund a Trump infrastructure plan,” among other things.
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