Mortgage giants Fannie Mae and Freddie Mac plunge 45% after Supreme Court ruling gives Biden power to remove director

Fannie mae
  • Shares of mortgage giants Freddie Mac and Fannie Mae fell as much as 45% on Wednesday following a Supreme Court ruling.
  • The court made it easier for a US President to remove the head of the Federal Housing Finance Agency.
  • President Biden plans to replace FHFA director Mark Calabria following the court ruling, The New York Times reported.
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Mortgage giants Fannie Mae and Freddie Mac plunged as much as 45% on Wednesday following a ruling from the Supreme Court.

As first reported by Bloomberg, in a 7-2 decision, the court gave the US President authority to remove the head of the Federal Housing Finance Agency.

Following the ruling, The New York Times reported that President Joe Biden plans to replace FHFA director Mark Calabria with someone “who reflects the administration’s values,” according to an unnamed White House official.

Calabria was appointed as head of the regulator that oversees Fannie Mae and Freddie Mac – the Federal Housing Finance Agency – by former President Donald Trump in 2019. Calabria had plans to release the mortgage giants from government control over a decade after they were taken over by the US government to ensure their survival during the 2008 housing crash.

That plan had many investors excited about the upside potential of Fannie Mae and Freddie Mac, which both trade on the over-the-counter exchange. Being released from government control would allow both companies to more efficiently allocate their capital and likely increase their profit margins.

With a new FHFA head, the mortgage giants will likely prioritize Biden’s goals of closing the racial housing gap and supporting the overall housing market, which in turn helps the broader economy. It is less likely that the new appointee will try to accelerate their exit from government control as Calabria has during his tenure.

Prior to the ruling on Wednesday, Fannie Mae and Freddie Mac traded up as much as 12% and 10%, as investors likely anticipated a favorable ruling.

Fannie Mae stock chart.