The FHFA is preparing Fannie Mae and Freddie Mac for a record-setting IPO. The FHFA is interviewing Wall Street firms to handle a public offering of the shares of the nation’s two largest mortgage financiers that would dwarf any IPO in history.

The Federal Housing Finance Agency has been interviewing Wall Street investment banks. Fox cited anonymous sources directly involved in the process.

According to Fox News:

Winning the adviser appointment would be a coveted one and potentially lucrative given the size of the offering.

The government told investment banks that offering is expected to be somewhere between $150 billion and $200 billion.

Fannie Mae and Freddie Mac offerings would not be technically an IPO.

Fannie Mae began trading on the New York Stock Exchange in 1968. Whereas, Freddie Mac began trading on the same exchange in 1989.

FHFA is offering 80% of Fannie Mae and Freddie Mac shares held by the federal government. The government received the shares as part of its bailout during the financial crisis.

The Collapse Of Fannie Mae And Freddie Mac Created The FHFA

Fannie Mae and Freddie Mac shares once traded above $68 a share. Investors considered the shares as safe as U.S. Treasuries. This was because of an implied government backing. NYSE kicked the two GSEs off the exchange after their government takeovers. They soon became penny stocks. In November 2008, you could buy a share of Fannie Mae for 54 cents. However, the price today is around $3.

Fannie Mae was created by Congress in 1938 as part of President Franklin Delano Roosevelt’s New Deal Program.

With Fannie Mae, bankers could make loans that met the conservative standards set by the government.

The banks could then sell them to Fannie Mae to be packaged into mortgage bonds that were sold to private investors. That off-loading of risk created a liquid mortgage market. Former Federal Reserve Chairman Alan Greenspan and others would later call Fannie Mae “the envy of the world.”

Subprime defaults caused a panic on Wall Street in 2008 and Fannie Mae and Freddie Mac became one of its victims. Subprime loans had reaped huge profits from pushing the risky private-label loans, the damage spread throughout the economy.

As a result, loans backed by Fannie Mae and Freddie Mac began defaulting later when massive job losses meant people couldn’t pay their monthly bills. Homeowners also couldn’t sell their homes because the real estate market was in chaos.

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