Liquidate Fannie and Freddie

Trump administration officials announced last week that if Congress doesn’t come up with a plan to overhaul Fannie Mae and Freddie Mac in the next couple years, they will. Their plan is to simply privatize the two giant mortgage banks. A better one would be to liquidate them.

Fannie Mae and Freddie Mac have been under the control of the government ever since they were nationalized during the Great Recession a decade ago. The federal government took responsibility for Fannie and Freddie’s debts, and in exchange gets to keep all their profits. On the surface, the deal has worked out for the U.S. Treasury: The government paid out roughly $191 billion in bailout money and has earned about $280 billion in profits. That gain, however, masks the enormous liability that taxpayers are carrying — and the way in which Fannie and Freddie make the mortgage markets more risky.