Washington, D.C. — In the wake of President Trump’s comments stating he is giving “serious consideration” to ending the 17 year conservatorship of Fannie Mae and Freddie Mac, American Economic Liberties Project released a new policy brief today laying out the serious risks of releasing the government-sponsored enterprises (GSEs)—which underpin America’s $12 trillion mortgage market—from conservatorship without comprehensive legislative safeguards.

“Trump’s push to privatize Fannie and Freddie—especially through a rushed administrative process—could put taxpayers on the hook for an uncompensated bailout of private shareholders, cut off mortgage access for first-time homebuyers, and put smaller mortgage lenders out of business,” said Bharat Ramamurti, Senior Advisor for Economic Strategy at the American Economic Liberties Project. “The current conservatorship isn’t perfect, but it fulfills the original purpose of Fannie and Freddie: delivering low-cost liquidity to the mortgage market and supporting the continued existence of the 30-year fixed-rate mortgage. A hasty release from conservatorship is a solution in search of a problem.”

Fannie Mae and Freddie Mac were placed into conservatorship in 2008 after the housing market collapse exposed major weaknesses in their capital reserves and risk management. Since then, under the supervision of the Federal Housing Finance Agency (FHFA), the GSEs have helped stabilize the mortgage market, supported access to 30-year fixed-rate mortgages, and returned billions to U.S. taxpayers. Despite the system’s relative success, hedge funds and investors holding junior preferred shares—whose value would rise dramatically upon a release—have pushed for privatization. Trump’s recent comments have renewed speculation about an imminent release.

Economic Liberties’ brief identifies seven key questions policymakers and the public must consider before any GSE release—including its impact on credit access, interest rates, small lenders, taxpayer exposure, and affordable housing funding. It warns that a privatization effort led by the Trump administration could repeat many of the mistakes that triggered the 2008 financial crisis, including deregulation, risky investments, and weakened public oversight.

Read the full brief here.

###

The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.