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Uncle Sam’s $8 Trillion Dilemma
January 15, 2025
A few months ago I stumbled on a briefing by the Cato Institute that proposed a mammoth move by the Federal government that at the time I thought could never happen. No, it has nothing to do with Greenland becoming the 51st state. (Although I can agree with some of the arguments made to purchase it!)
It has to do with what Bloomberg calls a “stodgy 87-year-old company” – Fannie Mae and its corporate relative Freddie Mac. These two companies guarantee roughly 70% of US home mortgages.
The report proposed that these two government-sponsored enterprises (GSEs) be privatized by sending the corporations into receivership. The sale out of receivership would require Congressional approval, but it would effectively remove $8 trillion of liabilities from the government’s balance sheet. This plan was originally proposed by the Trump administration during his first term. Now that plan has resurfaced after some of his top allies have renewed the call to privatize the two mortgage backers.
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