Bessent floats adding GSEs to sovereign wealth fund

As the second Trump administration contemplates the potential establishment of a sovereign wealth fund (SWF) — a state-owned investment fund that typically invests in real and financial assets like stocks, bonds, real estate or alternative investments — the Treasury secretary is reportedly contemplating the inclusion of the government-sponsored enterprises (GSEs) in such a fund.

On Feb. 3, the president issued an executive order directing the secretaries of the Departments of the Treasury and Commerce, respectively, to “develop a plan for the establishment of a sovereign wealth fund consistent with” elements he said it could contribute to, including “fiscal sustainability, lessen[ing] the burden of taxes on American families and small businesses, establish[ing] economic security for future generations, and promot[ing] United States economic and strategic leadership internationally.”

Last week, Treasury Secretary Scott Bessent was a featured guest on the conservative “All-In Podcast,” and spoke about the potential for including the GSEs in such a fund. When asked if he was excited about the prospect of establishing an SWF, Bessent said that he was.

“He wants to create assets for the American people, not just debt,” Bessent said. “[The] government has a big stake in Fannie Mae and Freddie Mac.”

One of the hosts rhetorically asked where that stake goes once the GSEs ultimately exit conservatorship, and Bessent later said that determining what would go into an SWF would be a whole government effort.

“Every other department head is looking for the assets that we can mobilize. So if we have energy leases, the federal government — going back to the housing shortage — owns a lot of land in downtown urban areas, or suburban adjacent things [in places like] Nevada or Utah, can we use that land?”

Bessent was also asked about what can be done to improve housing affordability, and he said that problems and solutions would be determined element by element. He offered the potential impact of “broken” insurance markets as an example, before commenting on the nature of building.

“I’ve been involved in the house-building business,” he said. “There’s been no technological change in house building in 50 years, maybe 60. Some of the building codes go all the way back to the Chicago fire [of 1871]. The way we categorize housing, it’s either stick-built or modular. Is there something in the middle?”

He posited “prefab” as a potential option, but also pointed out that different municipalities maintaining different building codes is an impediment to manufactured housing since there are a raft of different local rules that could hinder centrally constructed non-site-built homes.

Reactions to the idea have been positive from financial executives and wealthy investors. Bill Ackman, a billionaire hedge fund manager, endorsed the idea in a long social media post on X.

“The only credible scenario where Fannie Mae and Freddie Mac (“F2”) become core assets of a sovereign wealth fund in the  [Trump] administration is a world in which they emerge from conservatorship respecting the shareholders’ place in the hierarchy of claims,” Ackman wrote.

Ronald Kruszewski, chairman, chief executive officer and former president of Stifel, wrote in the Financial Times that such a move would “not only provide funding but also support the efficient privatisation of these key financial institutions” if the GSEs were moved into an SWF prior to their privatization.

Over the weekend, reporting at the Wall Street Journal stated that the White House has at least contemplated an executive order that would direct agencies to begin assessing how the GSEs would be moved out of conservatorship.

“Trump allies and other Republicans view privatization as a way to reduce the country’s deficit and return money to taxpayers,” the report said. “If not done carefully, some worry that privatization could drive investors to demand higher premiums in the mortgage-backed securities market. That would trickle through to borrowers in the form of higher mortgage rates.”

Previously, officials including Bessent and FHFA Director Bill Pulte said that any exit from conservatorship would need to take the impact on mortgage rates into account before progressing.