President Donald Trump has issued a direct order to government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to purchase $200 billion worth of mortgage-backed securities. This unprecedented move places the White House squarely into housing finance policy with the stated goal of pushing mortgage rates lower, a function traditionally managed by the independent Federal Reserve.
The announcement immediately jolted financial markets, cutting risk premiums on new mortgage bonds by 0.18 percentage points and sending homebuilder stocks higher. Analysts estimate the $200 billion purchase could lower mortgage rates by approximately 0.25%. Bill Pulte, head of the Federal Housing Finance Agency, defended the action, stating, "This is the benefit of running things like businesses, you have options with your cash... We’re focused on utilizing Fannie and Freddie in a way that no other president has."
The decision has sparked significant controversy, with critics warning it undermines the Federal Reserve's independence and introduces political risk into the mortgage market. Kirill Krylov of Baird & Co. called it a "red flag," noting it manipulates rates in a market that has tried to distance itself from such practices. Legal scholar Jeffrey Gordon from Columbia Law School added that it "sets a new precedent and chips away at Fed independence."
Concurrently, cryptocurrency analysts are debating the potential secondary effects on digital assets. Observers like Lark Davis suggest that by injecting substantial liquidity into the financial system and challenging traditional monetary policy norms, the move could create an environment of easier liquidity that may indirectly support alternative assets like Bitcoin. The theory posits that such large-scale government asset purchases increase systemic liquidity, which can flow into various markets, including crypto.
The action also casts doubt on long-planned initial public offerings (IPOs) for Fannie Mae and Freddie Mac, with analysts like Vitaliy Liberman from DoubleLine Capital suggesting the government now views them as too important a policy tool to relinquish. The tension between using the GSEs for public policy versus generating profits for future private investors, as highlighted by JPMorgan analysts, remains unresolved. With the U.S. facing a severe housing affordability crisis, the White House has signaled it may continue to use this new lever, leaving markets to watch closely for further developments.
