Remember when the exit of the housing government-sponsored enterprises (GSEs), Fannnie Mae and Freddie Mac, from conservatorship was imminent? In May, President Trump floated the idea of re-privatizing Fannie and Freddie. As CNN reported it:

I am giving very serious consideration to bringing Fannie Mae and Freddie Mac public,” Trump posted on his social media website, Truth Social, on Wednesday, saying he would consult with cabinet members and make a decision “in the near future.”

Fannie Mae and Freddie Mac are doing very well, throwing off a lot of CASH, and the time would seem to be right,” the post said.

Investors certainly bought the hype. The president’s posts prompted a double-digit rally in the share prices of the GSEs (which trade over the counter). But maybe it isn’t such a sure thing after all. Trump failed in these efforts in his first term in office. What’s more, the GSEs have remained in conservatorship for 17 years.

For those curious to see why, take a gander at Privatizing the GSEs: More Questions Than Answers by Thomas Kingsley. There are lots of issues, but three stand out to Eakinomics.

First, in any privatized future, what happens to the current shareholders? They have been in legal limbo and their status would have to be resolved. Would they be compensated to the tune of their pre-conservatorship value? Would they be wiped out? Clearly, they will care and it will matter to the mechanics of the transition.

Second, what happens to housing policy? As wards of the state, the GSEs have been used for policy objectives – e.g., the Biden Administration’s “special purpose credit program.” How will any such affordability objectives be met when the credit market intermediation channels are entirely private? It seems very unlikely that giving up on housing affordability goals will occur in the future.

Finally, when will Congress get around to GSE legislation, what will be in such GSE legislation, and what will force Congress to act? One cannot simply press rewind and recreate the 2007-style GSEs. That would be asking for trouble. So, the GSE charters will have to be modified, and their supervisory structure modernized. Just as it has shirked the responsibility of authorizing executive military actions, Congress has been loath to take responsibility for entities that back the vast majority of mortgages.

That’s a good start. But there is much more to warrant a look at Kingsley’s insights.