Fannie & Freddie’s $500B Bailout: Trump’s Bold Plan to Create the Great American Mortgage Company

Should Fannie and Freddie Go Private or Stay Public?

The future of Fannie Mae and Freddie Mac isn’t just a policy question, it’s a decision that could reshape the entire U.S. housing market. In this post, we’re breaking down why this issue matters, the history behind it, and what both scenarios might look like for your wallet.

A Quick History Lesson

Fannie Mae was created during the Great Depression in 1938 to provide liquidity to the housing market. In 1970, Freddie Mac joined the party. Together, these government-sponsored entities (GSEs) purchase mortgages, bundle them into mortgage-backed securities, and sell them to investors. That system is what allows banks to keep lending and helps keep 30-year fixed-rate mortgages possible in the U.S., a rarity globally.

The 2008 Crash and Conservatorship

When the 2008 financial crisis hit, Fannie and Freddie were bailed out and placed under conservatorship by the federal government. That move created what’s known as an implicit government guarantee: the idea that if anything goes wrong, Uncle Sam will step in. While not officially part of the national debt, Fannie and Freddie are tied to over $5 trillion in mortgage liabilities, debt that taxpayers might ultimately be responsible for.

So What’s the Debate?

There are two main options being considered:

Option A: Keep Them Under Government Control

• Pros: Stability, low mortgage rates, liquidity even in tough times

• Cons: Continues taxpayer exposure and government manipulation of the market

Option B: Privatize Fannie and Freddie

• Pros: Reduces government debt risk, invites competition and innovation

• Cons: Likely higher mortgage rates, less affordable housing, potential instability during the transition

Who Wins Either Way?

If Fannie and Freddie go private, hedge funds, big banks, and ultra-wealthy investors are poised to benefit. Everyday homebuyers? Maybe not. Going private could raise rates and limit access to credit, especially for those who don’t meet the “perfect borrower” profile.

On the flip side, keeping the system as-is could mean continuing an artificial inflation of home prices due to cheap credit and massive liquidity. It’s a “damned if you do, damned if you don’t” situation.

Final Thoughts: A Hot Potato of Epic Proportions

This isn’t just about two obscure entities. It’s about who gets to own a home in America and what it’ll cost them. Fannie and Freddie are holding a hot potato. And no one seems ready to catch it without getting burned.

Should we trust the free market? Or is this one area where government control is still the lesser evil?