Debate Is Buzzing Over Whether Fannie and Freddie Are Ready To Be Released From Conservatorship
Only if, our columnist says, they are fully shorn of any free guarantees by the government.
The arrival of the new Trump Administration is reviving debates about releasing Fannie Mae and Freddie Mac from the conservatorship and government control that came with their bailout by the Treasury in 2008. What should happen next is a major financial system issue, since Fannie and Freddie are giant firms, with combined assets of more than $7.7 trillion.
The most important factor in the “release” decision is seldom mentioned: Should the future Fannie and Freddie, as in their pre-bailout past, get a free government guarantee of all their obligations, now totaling $7.5 trillion? In other words, should Fannie and Freddie’s shareholders get a taxpayer subsidy of billions of dollars a year? The answer is that this costly mistake of the past should not be repeated.
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