Fannie and Freddie, as you may remember, were buffeted by the financial crisis. In September 2008, the government put the two entities into conservatorship and provided a $187.5 billion bailout. The choice was based on a careful legal and economic calculus. The government could not afford to liquidate the entities, which had trillions of dollars in mortgage assets, without further damage to the economy. However, the government also decided not to fully nationalize them. The reasons were political: The government did not want to look as if it owned these two entities, and nationalizing Fannie and Freddie would also have added trillions of dollars in debt to the government’s balance sheet, blowing up the national debt ceiling.
Fannie and Freddie were, thus, cast into purgatory. They were put under the supervision of the government, but the public still owned 20.1 percent of them.