How Sallie Mae Went Private, And
How Fannie Mae And Freddie Mac Could Do The Same, by Wayne Duggan , Benzinga Staff Writer, 12/1/16.
Shares of Federal
National Mortgage Assctn
Fnni Me FNMA
1.48%and Federal
Home Loan Mortgage Corp FMCC
1.53% are both up about
50 percent in the past two days following comments from Donald Trump’s
recently-appointed Treasury Secretary Steven Mnuchin.
On Wednesday, Mnuchin confirmed his
appointment to the position and said that Fannie Mae and Freddie Mac can’t continue to
be owned
by the government.
“We will make sure that when they are
restructured, they are absolutely safe and don’t get taken over again,” Mnuchin
said. “But we’ve got to get them out of government control.”
Mnuchin didn’t provide details about the
game plan for Fannie and Freddie, but some analysts have
speculated that the Trump administration intends to allow the two
government-sponsored enterprises (GSE) retain their profits and enter the
private market. That could put Fannie and Freddie on the same path that student
lender SML Corp SLM
0.23%took.
“Sallie Mae” also started as a GSE, but
shareholders voted to cut ties with the government back in 1997. In the 10
years that followed, Sallie Mae stock skyrocketed more than 244 percent, more
than four times the return of the SPDR S&P 500 ETF Trust SPY
1.46%.
Of course, the stock fell off a cliff
during the financial crisis. In the past 10 years, Sallie Mae stock is down
36.5 percent, while the SPY is up 56.6 percent.
Fannie and Freddie would certainly be
fine with a repeat of the first 10 years of the Sallie Mae privatization story.
However, until Trump and Mnuchin reveal more details about their plan of attack
for the GSEs, there’s no way to know whether or not the stocks hold any value
at all.
Comments
We need to continue
privatize everything the government does.
Norb Leahy, Dunwoody
GA Tea Party Leader
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