Fannie Mae and Freddie Mac are at the core of America’s system of housing finance
THE EFFECTS of financial crises have a habit of lingering. In 2008, having suffered heavy losses amid the wreckage of America’s housing market, Fannie Mae and Freddie Mac, the two “government-sponsored enterprises” that support much of the country’s mortgage finance, were bailed out by the federal government to the tune of $188bn. They were placed in “conservatorship”, a form of government control. That was supposed to be temporary. It has lasted for more than a decade.
Investors hoped for a concrete plan. But the treasury secretary’s report is long on aspirations and short on specific policies. As part of his privatisation agenda, Mr Mnuchin wants government support for the housing market to be made more explicit. Rather than simply being bailed out if they run into trouble again, the GSEs should pay a fee for the government guarantees they already implicitly get.
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