The Price Action In Fannie, Freddie After Mnuchin's Capitol Hill Testimony, Explained

Federal National Mortgage Assctn Fnni Me FNMA "Fannie Mae" and Federal Home Loan Mortgage Corp FMCC "Freddie Mac" shares fell about 10 percent in the wake of comments by former Goldman Sachs partner Steve Mnuchin during his Thursday confirmation hearing for the Treasury Secretary post.

Mnuchin, who previously indicated his support for the privatization of the government sponsored enterprises, hedged those comments before the Senate Finance Committee on Thursday — and the market reaction was instant.

Fannie Mae shares immediately fell 8.86 percent Thursday afternoon and Freddie Mac shares were down 9.16 percent after Mnuchin told the Senate Finance Committee he never intended to state that the entities should be “recapped and released.”

The Treasury nominee testified that a bipartisan solution is needed for the GSEs. Fannie and Freddie have been well run without creating risk for the federal government, and are important for liquidity, Mnuchin said during his remarks.

The downward price action is in stark contrast to the day Mnuchin’s nomination to the Trump cabinet was announced, when Fannie Mae jumped 49 percent and Freddie Mac saw a 46 percent rally.

While both Fannie and Freddie shares rebounded about 8 percent following the knee-jerk reaction sharply lower, the stocks remain about a percent lower.

Image Credit: By Office of the President-elect [CC BY 4.0], via Wikimedia Commons