The Most Devious Fannie & Freddie Scheme Yet

Washington, D.C., is awash in plans for what to do with Fannie Mae and Freddie Mac. The companies have been in limbo for years now, ever since sky-high rates of defaulting mortgages forced them to go bust back in 2008. After the firms were privatized, they operated with the understanding that their debt was implicitly guaranteed by the federal government; that implicit guarantee became explicit when Congress gave the Bush administration formal legal authority to follow through. The firms went into “conservatorship”—i.e., a federal takeover—and needed nearly $200 billion to pay what they owed. Now that the housing market has revived and the companies are profitable, the bipartisan consensus is that something should be done with them.